Question

A mortgage has the terms shown below:
Balloon mortgage
$400,000
20/6 balloon
8% annual rate
Initial Monthly Payment: $3,345.76
What is the amount of the balloon payment rounded to the nearest dollar?

Answer 1

The choices are
$377,803
$339,756
$337,506
$$159,105

Answer 2

No matter what I do I keep getting $340,851.99, which isn't one of the choices. Someone please tell me what I'm doing wrong, and walk me through it. Thank you. I appreciate it greatly.

Answer 3

calculate the monthly payment for a 20 fixed loan at 8%

then use that to balance out the loan after 6 years

Answer 4

P = 400000k^n(1-k)/(1-k^n)

n = 20*12 = 240
k = 1+.08/12

400000k^(240)(1-k)/(1-k^(240)); k = 1+.08/12

what is your monthly payment you got in your calcs?

Answer 5

$3,345.76

Answer 6

lol, i see they give it too you already ... so much for reading ALL of the question:

http://www.wolframalpha.com/input/?i=400000k%5E%28240%29%281-k%29%2F%281-k%5E%28240%29%29%3B+k+%3D+1%2B.08%2F12

3345.76 is what i get too

Answer 7

so to balance it out ...

A = Bk^n + P(1-k^n)/(1-k)

B = -400,000, P is given, k is from before, and n=6*12 this time = 72

Answer 8

Even after getting that, when plugging it into a calculator, I still get the monthly payment I mentioned above, which isn't one of the choices. I don't understand what I'm doing wrong.

Answer 9

how would you find the balance of a fixed rate mortagage after 6 years?

Answer 10

im getting one of the answers but i use my own formula for it

Answer 11

What formula do you use?

Answer 12

\[A=Bk^n+P\frac{1-k^n}{1-k}\]
\[B=initial,~P=Payment,~k=compunded~rate, ~n=periods\]

Answer 13

as such\[\Large A=(-400000)k^{6*12}+P\frac{1-k^{6*12}}{1-k}\]

Answer 14

i got no idea how to plug that into a financial calculator tho

Answer 15

http://www.wolframalpha.com/input/?i=-400000+k%5E%2872%29%2B%283345.76%29%281-k%5E%2872%29%29%2F%281-k%29%3B+k+%3D+1%2B.08%2F12

Answer 16

I plugged it in and got $337,506.

Answer 17

me too

Answer 18

Thank you for your help. That was really tough. Now it's onward for me to even more difficult questions.

Answer 19

good luck :)