How to do this problem using the formula and financial calcualtor You need a 25-

ID: 2815503 • Letter: H

Question

How to do this problem using the formula and financial calcualtor

You need a 25-year, fixed-rate mortgage to buy a new home for $255,000. Your mortgage bank will lend you the money at an APR of 5.5 percent for this 300-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large wll this balloon payment have to be for you to keep your monthly payments at $950? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Balloon payment

Explanation / Answer

Balloon Payment = $395,445.69

Using financial calculator BA II Plus - Input details:

I/Y = Rate / Frequency of compounding = 5.5/12 =

0.458333

PMT = Regular payments =

$950.00

N = Total number of periods =

300

PV = Present Value =

-$255,000.00

CPT > FV = Future Value =

$395,445.69