Question

Help?

A $700,000 balloon mortgage has terms of 20/4 with a 6% interest rate. What is the monthly payment rounded to the nearest dollar?

$4,510

$2,917

$3,092

$5,015

Answer 1

@ranga

Answer 2

@agent0smith

Answer 3

@jim_thompson5910

Answer 4

@BrandonGarza777

Answer 5

This balloon mortgage is amortized over a 20 year period but a huge balloon payment will be due after 4 years.

The monthly payment formula is: \[\Large M = \frac{ P * c * (1+c)^{12t}}{ [(1+c)^{12t} - 1] }\]

Answer 6

P is the Principal = $700,000
c is the monthly interest rate in decimal = 6/1200 = 0.005
(Note: I used the symbol c instead of the usual r because normally we are used to using r as an annual interest rate. We should not make the mistake of putting 0.006 in the formula. c is the monthly interest rate in decimal)
t is the amortization period term agreed to in the loan. t = 20 years.

Plug the numbers into the formula and see what you get for M.

Answer 7

wait whats c and p?

Answer 8

ohh hold on

Answer 9

P is Principal or the loan amount. It is $700,000
c is monthly interest rate in decimal.
We are given r = 6%. Divide it by 12 to get monthly interest rate in percent
6/12 = 0.5% convert percent to decimal 0.005. So c = 0.005

Answer 10

I got 37 :(

Answer 11

\[\Large M = \frac{ 700000 * 0.005 * (1.005)^{240} }{ (1.005)^{240} - 1 } = ?\]

Answer 12

The numerator above simplifies to 11585.72 and the denominator computes to 2.31. So M = 11585.72 / 2.31 = ?

Answer 13

$5,015