You want to buy a 215000 home You plan to pay 20 as a down p

You want to buy a $215,000 home. You plan to pay 20% as a down payment, and take out a 30 year fixed loan for the rest.
Round all answers to the nearest cent as needed.

a) How much is the loan amount going to be?
$

b) What will your monthly payments be if the interest rate is 6.2%?
$

c) What will your monthly payments be if the interest rate is 7.2%?

Solution

a) Loan amount = $215000( 1 - 0.20) = $ 172000

b) M = P(1 +r)^n*r/[(1+r)^n -1]

where M = monthly installment ; P = loan amount ; r = rate of interest

= 172000( 1 +0.062)^(30*12)0.062/ [(1 +0.062)^360 -1 ]

= $1053.45

c) if r = 0.072

then M = 172000( 1 +0.072)^(30*12)0.072/ [(1 +0.072)^360 -1 ]

=$1167.52

c)