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monroe17 Group Title

Miss Crystal Palace just purchased – you guessed it – a crystal palace for $650,000. She makes a 25% down payment and finances the balance with a mortgage at an interest rate of 5.6% for 15 years, making monthly payments. a. What amount will she borrow? b. Complete the amortization table for the first three payments. (Show all work!)

  • 2 years ago
  • 2 years ago

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  1. phi Group Title
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    can you answer (a) ? 75% of 650,000 or 650,000- 25% of 650,000

    • 2 years ago
  2. monroe17 Group Title
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    162500?

    • 2 years ago
  3. monroe17 Group Title
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    oh wait no. 649999.75?

    • 2 years ago
  4. monroe17 Group Title
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    no isn't my first answer right?

    • 2 years ago
  5. phi Group Title
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    If you put down a down-payment, do you expect it to be all 650,000? to do this, remember that 25% is the same as 25/100 (or 1/4)

    • 2 years ago
  6. monroe17 Group Title
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    is it 162500?

    • 2 years ago
  7. phi Group Title
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    that is the down payment. How much is the loan?

    • 2 years ago
  8. monroe17 Group Title
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    162500(1+0.056/12)^12*15 162500(1+0.056/12)^180 (162500)(2.311845392)=$375,674.88

    • 2 years ago
  9. monroe17 Group Title
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    that's what I did...

    • 2 years ago
  10. monroe17 Group Title
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    ohh in my equation where i put 162500.. is that supposed to be 487500 instead?

    • 2 years ago
  11. phi Group Title
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    162,500 is 1/4 of the 650,000 162,500 is the amount paid up front. You must now borrow the remainder. so your work up above looks good except 162500 is not the correct amount for the loan

    • 2 years ago
  12. monroe17 Group Title
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    the amount of the loan is 1,127,024.63?

    • 2 years ago
  13. phi Group Title
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    For (a), I think they want 487,500 to do (b) you have to figure out how much the total loan ends up costing. Is that the 1,127,024 number?

    • 2 years ago
  14. monroe17 Group Title
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    yes the total loan I calculated is 1,127,024.63 I believe.

    • 2 years ago
  15. phi Group Title
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    now find the monthly payment

    • 2 years ago
  16. monroe17 Group Title
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    how? what formula?

    • 2 years ago
  17. monroe17 Group Title
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    6261.25 a month?

    • 2 years ago
  18. phi Group Title
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    now you can do the amortization schedule start with the loan balance at the start 487500 add one month of interest (0.056/12)*487500 then subtract off the payment to get the loan balance for the next month. do the same thing for the 2nd (and 3rd) month, except use the new loan principal

    • 2 years ago
  19. monroe17 Group Title
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    what new loan principal?

    • 2 years ago
  20. phi Group Title
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    when you make a payment, the amount you owe goes down

    • 2 years ago
  21. monroe17 Group Title
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    (0.056/12)*487500= 2275

    • 2 years ago
  22. monroe17 Group Title
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    487500-2275= 485225 for the next month?

    • 2 years ago
  23. monroe17 Group Title
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    2264.38--485235.62 2264.43--482971.19

    • 2 years ago
  24. monroe17 Group Title
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    how do I put that in a chart though with the.. amount of payment interest payment applied to principal and balance?

    • 2 years ago
  25. phi Group Title
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    OK, I just checked about loans. there is a formula to figure out the monthly payment FV= payment *( (1+i)^n -1)/i where future value FV is the number you found, does this look familiar?

    • 2 years ago
  26. monroe17 Group Title
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    yeah, give me a sec.

    • 2 years ago
  27. monroe17 Group Title
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    so the formula I used gave me 9268.65 as the monthly payment

    • 2 years ago
  28. phi Group Title
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    how? I get something else

    • 2 years ago
  29. monroe17 Group Title
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    P=1127024.63 n=180 r/m=0.56/12=0.0046666667 1127024.63(1+0.0046666667)^180=R[(1+0.0046666667)^180-1)/(0.0046666667)] 2605506.713=R(281.1097278) R=9268.65

    • 2 years ago
  30. monroe17 Group Title
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    the amount is 1127024.63 the annual rate is 5.6% and the time is 15 years

    • 2 years ago
  31. monroe17 Group Title
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    and the interest payment is 5259.45

    • 2 years ago
  32. phi Group Title
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    I match up, but with 1127024.63=R(281.1097278)

    • 2 years ago
  33. monroe17 Group Title
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    4009.2 is the applied principal and the balance is 1127024.63

    • 2 years ago
  34. monroe17 Group Title
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    do I not solve 1127024.63(1+0.0046666667)^180 that?

    • 2 years ago
  35. monroe17 Group Title
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    because in this example I have is shows to do that..

    • 2 years ago
  36. phi Group Title
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    for your formula, it looks like you should use the original loan amount on the left hand side. Do you notice that the left side is future value (1,237,024) which can be calculated as 487500*(1+0.056/12)^180

    • 2 years ago
  37. monroe17 Group Title
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    ohh so after solving it becomes 1127024.63

    • 2 years ago
  38. monroe17 Group Title
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    so is the monthly payment 4009.20?

    • 2 years ago
  39. phi Group Title
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    yes. so now to the amort. to answer amount of payment interest payment applied to principal and balance? you have the first part. interest is principal* 0.0046666667 (5.6% /12) so you start with P (487500) add interest subtract payment get new P (call it P2 for second month) The interest payment is the amount of interest due. the applied to principal is the amount of the payment left over after paying the interest P2 is the balance

    • 2 years ago
  40. monroe17 Group Title
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    wait wait.. is the interest payment 5259.45? (1127024.63)(0.0046666667)(1)

    • 2 years ago
  41. phi Group Title
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    No, you use Present value (not future value) when you apply the interest.

    • 2 years ago
  42. monroe17 Group Title
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    (487500)(0.0046666667)(1)=2275.00

    • 2 years ago
  43. phi Group Title
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    that looks good. now the payment pays that interest and what is left over pays down the principal

    • 2 years ago
  44. monroe17 Group Title
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    4009.20-2275.00=1734.20?

    • 2 years ago
  45. phi Group Title
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    so now how much is the new principal?

    • 2 years ago
  46. monroe17 Group Title
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    485765.8?

    • 2 years ago
  47. phi Group Title
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    so put those numbers in the first row. now do it again with P=485765.80

    • 2 years ago
  48. monroe17 Group Title
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    so.. 1734.20*0.0046666667*1?

    • 2 years ago
  49. phi Group Title
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    You seem to be missing the main point. you pay interest on the dollars you owe (think of it as rent) after one payment you owe 485765.80. that is what the interest is on (not the 1734)

    • 2 years ago
  50. monroe17 Group Title
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    2266.91? that is the next interest payment for month 2?

    • 2 years ago
  51. phi Group Title
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    yes

    • 2 years ago
  52. monroe17 Group Title
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    then 1742.29 is the applied principal for month 2?

    • 2 years ago
  53. phi Group Title
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    yes

    • 2 years ago
  54. monroe17 Group Title
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    then the next balance is 484023.51?

    • 2 years ago
  55. phi Group Title
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    yes. one more payment to go

    • 2 years ago
  56. monroe17 Group Title
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    2258.78 for the interest payment?

    • 2 years ago
  57. monroe17 Group Title
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    and 1750.42 and the applied principal?

    • 2 years ago
  58. phi Group Title
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    yes

    • 2 years ago
  59. phi Group Title
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    Here is a site that computes the amort http://bretwhissel.net/cgi-bin/amortize

    • 2 years ago
  60. monroe17 Group Title
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    thank you so much for your help!

    • 2 years ago
  61. phi Group Title
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    It helped remind me how to do this stuff. It is a bit complicated.

    • 2 years ago
  62. monroe17 Group Title
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    haha yeah, well before I had absolute no idea where to start. Thank you so much for helping me..

    • 2 years ago
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