Olivia plans to secure a 5-year balloon mortgage of $290,000 toward the purchase

Question

Olivia plans to secure a 5-year balloon mortgage of $290,000 toward the purchase of a condominium. Her monthly payment for the 5 years is calculated on the basis of a 30-year conventional mortgage at the rate of 2%/year compounded monthly. At the end of the 5 years, Olivia is required to pay the balance owed (the "balloon" payment), what will be her monthly payment for the first 5 years, and what will be her balloon payment? (Round your answers to the nearest cent.) monthly payment 983.09 balloon payment 9573.74X

Explanation / Answer

N = 360, FV = 0, PV = 290,000 rate = 2%/12

use PMT function in Excel

monthly payment = 1,071.90

replace N with 60 and calculate FV

balloon payment = 252,892.65

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