Question

10. Sarah finances $549,000 with a 30/6 balloon mortgage at 5.35%. How much will she pay for principal and interest over the life of the loan? (3 points)
$715,175.04

O $713,297.14

O $717,393.12

O $719,607.40

Answer 1

Answer:

$717,393.12

Step-by-step explanation:

The 30/6 balloon mortgage means that she would make monthly payments for the first six years, while the balance outstanding after 6 years is paid by making one large payment.

The 30 implies that monthly payment should be computed on the basis it is a 30-year mortgage.

Loan amount=monthly payment*(1-(1+r)^-n/r

loan amount=$549,000

monthly payment=the unknown

r=monthly interest rate=5.35%/12=0.004458333

n=number of monthly payments in 30 years=30*12=360

549000=monthly payment*(1-(1+0.004458333)^-360/0.004458333

549000=monthly payment*(1-0.201607475)/0.004458333

549000=monthly payment*0.798392525/0.004458333

monthly payment=549000*0.004458333/0.798392525=$ 3,065.69

Total monthly payments for6 years=$ 3,065.69*12*6=$220,729.68

The ballon payment is the present value of monthly payments for 24 years remaining

Financial calculator:

N=288(24*12)

PMT=3065,69(monthly payment)

I/Y=5.35/12(monthly interest rate)

FV=0(balance after payments is nil)

CPT PV=$496,663.41    

Total payments=$496,663.41  +$220,729.68=$717,393.09