Question

You have decided to buy a new home and the bank offers you a 30 year fixed loan at 5.5% on a balance of $150,000. Use the table provided to determine the monthly payments. / a. $416.67 c. $852.00 b. $439.00 d. $874.32

Answer 1

See the formula of the present value of annuity ordinary through Google
Solve for PMT
PMT=150,000÷((1−(1+0.055
÷12)^(−12×30))÷(0.055÷12))=851.7
ROUND your answer 852

Answer 2

Option 2 -$852

Explanation:

Given : You have decided to buy a new home and the bank offers you a 30 year fixed loan at 5.5% on a balance of $150,000.

To find : The monthly payment?

Solution :

Formula of monthly payment,

`\text{Monthly payment}=\frac{\text{Amount}}{\text{Discount factor}}`

Discount factor
`D=(1-(1+i)^(-n))/(i)`

Put the value,

`M=(A* i)/(1-(1+i)^(-n))`

Where, A=$150000

r=5.5%=0.055

`i=(0.055)/(12)=0.004583`

t=30 year

`n=30* 12=360`

Substitute all the values,

`M=(150000* 0.004583)/(1-(1+0.004583)^(-360))`

`M=(150000* 0.004583)/(1-(1.004583)^(-360))`

`M=(687.5)/(1-0.19277)`

`M=(687.5)/(0.80722)`

`M=\$851.68`

Approximately, Monthly payment is $852.

Therefore,Option 2 is correct.