Question

Chin Woo bought a home for $160,000. He put down 20%. The mortgage is a 8 1/2% for 25 years. His yearly payments are?

Answer 1

Amount of the mortgage after down payment is
160,000−160,000×0.2=128,000

Now use the formula of the present value of annuity ordinary to find the yearly payment
The formula is
Pv=pmt [(1-(1+r)^(-n))÷r]
Pv present value 128000
PMT yearly payment?
R interest rate 0.085
N time 25 years
Solve the formula for PMT
PMT=pv÷[(1-(1+r)^(-n))÷r]
PMT= 128,000÷((1−(1+0.085)^(
−25))÷(0.085))
=12,507.10 ....answer