Engineering Economy

posted by .

A realtor sold a house on August 31, 1997 for $150k to a buyer in which a 20% down payment was made. The buyer took a 15yr mortgage on the property with an effective interest rate of 8% per annum. The buyer intends to pay off the mortgage owed in yearly payments starting on August 31, 1998.
a) How much of the mortgage will still be owed after the payment due in August 31, 2004, has been made?

b) Solve the same problem by separating the interest and the principal amounts.

Can you please show them step by step format so I can learn. thank you.

  • Engineering Economy -

    So the loan (B0) was 150*.8 = 120K
    The balance after 1 year and 1 payment would be B1=B0*(1.08)-P.
    B2=(B1*(1.08)-P = B0*(1.08)^2 - P*(1.08) - P
    ....
    B15 = B0(1.08)^15 - sum(P*(1.08)^i)

    Solve for the annual payment P such that B15=0.

    An Excel spreadsheet can handle this otherwise tedious calculation rather quickly.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. math

    Determine the regular payment amount, rounded to the nearest dollar. The price of a home is $160,000. the bank requires a 15% down payment. The buyer is offered two mortgage options: 1 year fixed at 8% or 30-year fixed at 8%. Calculate …
  2. math

    Determine the regular payment amount, rounded to the nearest dollar. The price of a home is $160,000. the bank requires a 15% down payment. The buyer is offered two mortgage options: 1 year fixed at 8% or 30-year fixed at 8%. Calculate …
  3. math

    Determine the regular payment amount, rounded to the nearest dollar. The price of a home is $160,000. the bank requires a 15% down payment. The buyer is offered two mortgage options: 1 year fixed at 8% or 30-year fixed at 8%. Calculate …
  4. infinite math

    Hey guys! really need help with this one!!! On December 31, 1995, a house is purchased with the buyer taking out a 30-year $90,000 mortgage at 9% interest compounded monthly. The mortgage payments are made at the end of each month. …
  5. algebra

    The price of a small cabin is $85000 the bank requires a 5% down payment the buyer is offered two mortgage options: 20 year fixed at 9.5% or 30 year fixed at 9.5% calculate the amount of interest paid for each option how much does …
  6. Math

    The price of a small cabin is $40,000. The bank requires a 5% down payment. The buyer is offered two mortgage options: 20-year fixed at 8.5% or 30-year fixed at 8.5 %. Calculate the amount of interest paid for each option. How much …
  7. Economics

    Calculate the total dollar amount paid for a house purchased for $200,000. The buyer paid $50,000 as down payment and the remaining $150,000 was obtained with a closed mortgage having a 25 year loan at 10% interest compounded semi-annually …
  8. math

    The price of a small cabin is $35,000. The bank requires a 5% down payment. The buyer is offered two mortgage options: 20-year fixed at 7.5% or 30-year fixed at 7.5%. Calculate the amount of interest paid for each option. How much …
  9. math

    The price of a small cabin is $55,000. The bank requires a 5% down payment. The buyer is offered two mortgage options: 20-year fixed at 7.5% or 30-year fixed at 7.5%. Calculate the amount of interest paid for each option. How much …
  10. math 118

    The price of a small cabin is ​$30,000. The bank requires a​ 5% down payment. The buyer is offered two mortgage​ options: 20-year fixed at 10​% or​ 30-year fixed at 10​%. Calculate the amount of interest paid for each option. …

More Similar Questions