Question

Okay so I need help answering another question. Can anyone who could actually understand it please help? Btw this is using Annuity formula and if anyone attempts to answer just to steal points shall be reported.

Step 1: Choose the price of the house. Then calculate 20% (which will be your down payment). Write down the price and 20% of the price.

Step 2: You don't have 20% now, so you will use an annuity to save up until you have the 20%. Choose a time in the future (2 years, 3 years, 4 years, 5, 10?) that you will purchase this house. Choose an APR that the bank will give you. Calculate how much you need to deposit every month in order to have the 20% down payment down the road. Write down the numbers of years, the interest rate, the formula with all the numbers plugged in, and the monthly deposits you will need to make.

Step 3: Now you take out a mortgage on the remaining 80%. Choose an APR that the bank will charge you (to be realistic, more than the APR in step 2) and the time you will take to pay off the loan. Write down the formula with all the numbers plugged in, and write down the minimum monthly payments.

Answer 1

Explanation:

1.)

The price of the house will be 500,000 which will make the downpayment 500,000*.2=100,000

so write down 500,000 and 100,000

2.)

For this one let's do 3 years at 3%

which would make the effective rate .03/12=.0025

let x= monthly payment

`100000=x((1+.0025)^(12*3)-1)/(.0025)`

which i will round to 2658.12

so write down: 3 years, 3%,
`100000=2658.12((1+.0025)^(12*3)-1)/(.0025)`, 2658.12

3.) the remaining 80% = 500,000-100000= 400,000

For this one let's do 6% for 6 years

which would make the effective rate: .06/12= .005

`400000=x(1-(1.005)^(-12*6))/(.005)\\x=6629.155157`

which i will round to 6629.16

so write down:
`400000=6629.16*(1-(1+.005)^(-12*6))/(.005)`, 6629.16