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Old 01-24-2014, 03:45 PM   #1
Netjet!
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Default [University - Finance] Trouble with Mortgage Payment Calculation

Hey, so I have a finance assignment due, and I'm stuck on the last question. Here it is:



I'm working on a), but I'm unsure of some things. Here's what I've done so far:

- I calculated the Effective Annual Rate by doing

EAR = [1 + 0.03 / 2]^2 -1
= 0.030225
= 3.02%

Then converted it to the monthly quoted rate

Q/m = (EAR + 1)^(1/m) - 1
Q/12= (1.0302)^(1/12) - 1
= 1.002482489 - 1
= 0.248%


I think that part's right. The problem is that when I go to calculate the payment amount, I'm not sure what the PV amount should be. I used $480,000 as (house price - down payment amount) = ($600,000 - $120,000)... but I don't know if that's right.

Then:

$480,000 = C x (1-PV factor)/r
= C x (1-(1/1.002482489^(240)))/0.00248
= C x (1-0.551529996)0.00248
= C x 180.8347

C (total periodic payment) = $2654.36

Total = 2654.36*12*20 = $637,045.87



Does that look right for the monthly payment/total?
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Last edited by Netjet!; 01-24-2014 at 03:59 PM..
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