Mortgage compounds and annuity?
The price of a home is $ 539,950. You put 25% down payment on the house, what is your payment? $ 134,987.50 You will borrow the remaining 75% ($ 404,962.50) from a bank. Your loan will be a fixed rate loan compounded monthly. What will your monthly payment will be (assuming a 30 year mortgage)? $__________? Assume that you buy the house now, but that price will remain the same over the next 10 years. Set up an ordinary annuity at 4.25% to save the down payment. What should be the payment of annuities to the down payment saved 10 years from now? $__________?
P = Payment L = Loan Amount Interest Rate = IR = N Number of Payments P = L * IR / [1 - (1 / (1 + IR) ^ N)] so: P = 404,962.5 IR * / [1 - (1 / (1 + IR) ^ 360)] Since you gave no interest rate, which is as far as I can go. FV = Future value = P = Rate Payments IR N = Number of payments FV = P ([(1 + IR) ^ N] -1) / IR Assuming annuity payments are made once a year, 134,987.5 = P ([(1 + 0.0425) ^ 10] -1) / 0.0425 = P 134,987.5 (12.146) The annual payments = $ 11113.54
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