A house costs $185,000. The terms of the sale are 20% down and the remainder to be paid in monthly payments for 20 years at an annual rate of 6.75% compounded monthly.Construct the payment schedule for the first 3 payments by filling in the table belowperiodinterestcum. int.principalbalance0    1    2    3

Question
Asked May 2, 2019
68 views

A house costs $185,000. The terms of the sale are 20% down and the remainder to be paid in monthly payments for 20 years at an annual rate of 6.75% compounded monthly.

Construct the payment schedule for the first 3 payments by filling in the table below

period interest cum. int. principal balance
0        
1        
2        
3        
check_circle

Expert Answer

Step 1

Given:

The cost of the house is $185,000.

20% of $185,000 is paid as down payment and the remaining amount should be paid in monthly installments for 20 years at 6.75%.

Step 2

Calculation:

Compute the amount of down payment as follows.

Since 20% of $185,000 is paid as down payment, obtain the 20% of 185,000.

down payment = $185,000(20%)

                                  = $185,000(0.20)

                                  = $37,000

Thus, the down payment is $37,000.

So, for the period 0, there is no interest, cumulative interest or principle amount.

Now, compute the balance amount after the 0 period.

Subtract the down payment from the cost of the house.

$185,000 - $37,000 = $148,000.

Thus, the balance amount that should be paid after peroid 0 is $148,000.

 

Step 3

Now compute the monthly payment amount as follows.

Since the annual interest rate is given as 6.75%, its monthly interest rate will be (6.75%)/...

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Math

Algebra

Other

Related Algebra Q&A

Find answers to questions asked by student like you

Show more Q&A add