Question

XP 4-35 (similar to) You are thinking of purchasing a house. The house costs $250,000. You have $36,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 8% per year. What will be your annual payment if you sign this mortgage? The annual payment is $ . (Round to the nearest dollar) Enter your answer in the answer box and then click Check Answer. All parts showing Check Answer Next « Previous

Answer 1

Cost of House = $250,000
Down Payment = $36,000

Amount Borrowed = Cost of House - Down Payment
Amount Borrowed = $250,000 - $36,000
Amount Borrowed = $214,000

Annual Interest Rate = 8%
Time Period = 30 years

Let Annual Payment be $x

$214,000 = $x/1.08 + $x/1.08^2 + … + $x/1.08^29 + $x/1.08^30
$214,000 = $x * (1 - (1/1.08)^30) / 0.08
$214,000 = $x * 11.257783
$x = $19,009

The annual payment is $19,009