Question

You have decided to buy a new home and the bank offers you a 30 year fixed loan at 5.5% on a balance of $150,000. Use the table provided to determine the monthly payments. / a. $416.67 c. $852.00 b. $439.00 d. $874.32

Answer 1

See the formula of the present value of annuity ordinary through Google
Solve for PMT
PMT=150,000÷((1−(1+0.055
÷12)^(−12×30))÷(0.055÷12))=851.7
ROUND your answer 852

Answer 2

Answer:

Option 2 -$852

Step-by-step explanation:

Given : You have decided to buy a new home and the bank offers you a 30 year fixed loan at 5.5% on a balance of $150,000.

To find : The monthly payment?

Solution :

Formula of monthly payment,

$\text{Monthly payment}=\frac{\text{Amount}}{\text{Discount factor}}$

Discount factor $D=\frac{1-(1+i)^{-n}}{i}$

Put the value,

$M=\frac{A\times i}{1-(1+i)^{-n}}$

Where, A=$150000

r=5.5%=0.055

$i=\frac{0.055}{12}=0.004583$

t=30 year

$n=30\times 12=360$

Substitute all the values,

$M=\frac{150000\times 0.004583}{1-(1+0.004583)^{-360}}$

$M=\frac{150000\times 0.004583}{1-(1.004583)^{-360}}$

$M=\frac{687.5}{1-0.19277}$

$M=\frac{687.5}{0.80722}$

$M=\ 851.68$

Approximately, Monthly payment is $852.

Therefore,Option 2 is correct.