1. Ten years ago Heather borrowed $400,000 to buy a house. She has a 30 year, 4.
ID: 2815232 • Letter: 1
Question
1. Ten years ago Heather borrowed $400,000 to buy a house. She has a 30 year, 4.50% fixed rate mortgage. She made the 120th payment today. Payments are made monthly. She now owes $_________ on the house.
2. Today is your 25th birthday. You will begin making equal deposits on each birthday until your 65th birthday into an account that earns 6%. The first deposit will be made today. You want to withdraw $75,000 per year beginning on your 71st birthday and ending on your 90th birthday. The deposits must be $_________.
Explanation / Answer
1. Monthly payment: PV=400000 I/Y=4.5%/12 N=30*12=360 CPT PMT=2026.74
Outstanding after 10 years: PV=400000 I/Y=4.5%/12 N=120 PMT=-2026.74 CPT FV=320357.74
She now owes $320357.74
2.
Present value at the end of 70 years: PMT=75000 N=20 I/Y=6% CPT PV=860244.09
Present value at the end of 65 years: FV=860244.09 I/Y=6% N=5 PMT=0 CPT PV=642824.43
Deposits required: N=41 FV=642824.43 I/Y=6% PV=0 CPT PMT=3894.78
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