Date:_ MAT 1460- Homework Section 5.4 Support your answer by showing your work.

Question

Date:_ MAT 1460- Homework Section 5.4 Support your answer by showing your work. 1. Susan and David are able to afford monthly house payments of $1000 (excluding additional fees such as property tax and escrow fees). What is the value of the house that they can afford if they can secure a 30-year 4.8% annual interest rate mortgage? what would be the unpaid loan balance after 10 years? Jeff wishes to buy a $30,000 sports car. If the loan company offers a 6% annual interest rate for 7 years, what would be his monthly payments? Assuming he made regular payments, how much interest would he have paid after 7 years? 2, A car dealership offers a special $500 off a $20,000 car if you make payments at the beginning of the rmonth instead of the end of the month payme inter you can afford either payment plan). 3. nts. If you can secure a 5-year 6% annual est car loan, find out if it is worth it by comparing their monthly payments (assuming that

Explanation / Answer

Answer to Question 1:

Monthly Payment = $1,000
Annual Interest Rate = 4.80%
Monthly Interest Rate = 0.40%
Period = 30 years or 360 months

Amount borrowed = $1,000 * PVIFA(0.40%, 360)
Amount borrowed = $1,000 * (1 - (1/1.004)^360) / 0.004
Amount borrowed = $1,000 * 190.59768
Amount borrowed = $190,597.68

Loan Outstanding after 10 years = $1,000 * PVIFA(0.40%, 240)
Loan Outstanding after 10 years = $1,000 * (1 - (1/1.004)^240) / 0.004
Loan Outstanding after 10 years = $1,000 * 154.09330
Loan Outstanding after 10 years = $154,093.30

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