An investor obtains a balloon mortgage with the terms shown below.

Mathematics

1 answer:

Flauer [41]2 years ago

6 0

9514 1404 393

Answer:

a. $3,455.20

Step-by-step explanation:

The monthly payment is given by the amortization formula:

A = P(r/12)/(1 -(1 +r/12)^(-12t))

for loan amount P at annual rate r for t years.

For this mortgage, we use P = $530,000, r = 0.068, t = 30.

A = $530,000(0.068/12)/(1 -(1 +0.068/12)^(-360)) ≈ $3,455.20

The monthly payment is $3,455.20.

_____

<em>Additional comment</em>

In 7 years, the balloon payment will be $481,559.91.

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