Question

Question 5 (5 points) Ahmad has decided to purchase a house instead of renting an apartment. He has $6000 to use as a present down payment for the house and agreed with the bank to pay monthly payments of $2000 starting one month from now. If the nominalDinterest rate of the loan is 12% peryear compounded monthly and the loan will be paid in 7 years, how much will Ahmad pay for this house in total at the end of the 7 years? 12-/month 34 month

Answer 1

Monthly nominal interest rate = 12%/12 = 1%

Number of months = 7 x 12 = 84

Total amount of loan after 7 years ($) = Monthly payment x F/A(1%, 84) = 2000 x 130.6723 = 261,344.6.......(A)

Future value of down payment ($) = 6000 x F/P(1%, 84) = 6000 x 2.3067 = 13,840.2........(B)

Total amount paid for house ($) = (A) + (B) = 261,344.6 + 13,840.2 = 275,184.8