Question

Asked May 2, 2019

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**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 |

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%)/...

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