Question

Chin Woo bought a home for $160,000. He put down 20 percent. The mortgage is at 8 1/2 % for 25 years. By using the table in the handbook, his yearly payments are:

Answer 1

Down payment
160,000×0.20=32,000

128000=X[((1-(1+0.085)^(-25))/0.085]
Solve for x
X=12507.10

Answer 2

His yearly payment is $12507.095

Explanation:

We are given

Chin Woo bought a home for $160,000

He put down 20 percent

It means that down payment is 20% of price of home

and he took loan of remaining amount

so, present value is 80% of 160000

`PV=(80)/(100)* 160000`

`PV=128000`

The mortgage is at 8 1/2 % for 25 years

so, r=8.5%=0.085

t=25

now, we can use payment formula

`P=(r(PV))/(1-(1+r)^(-t))`

now, we can plug values

`P=(0.085* 128000)/(1-(1+0.085)^(-25))`

now, we can solve for P

we get

`P=12507.095`

so,

His yearly payment is $12507.095