Question

Use the formula PMT = (P(r/n))/[1 - (1 + r/n) ^ (- n * l)] to determine the regular payment amount, rounded to the nearest dollar. The price of the home is $350,000. The bank requires a 20% down payment. The cost of the home is financed with a 30-year fixed rate mortage at an interest rate of 5.5%. a.) What is the amount of the mortgage? Showing your work is required.

Answer 1

To calculate the amount of the mortgage, we first need to determine the down payment and then subtract that from the total cost of the home.

1. **Calculate the down payment (20% of home price)**:
\[
\text{Down payment} = \text{Home Price} \times \text{Down Payment Percentage}
\]

Given:
- Home Price = \$350,000
- Down Payment Percentage = 20% = 0.20

\[
\text{Down payment} = 350,000 \times 0.20 = 70,000
\]

2. **Calculate the amount of the mortgage**:
\[
\text{Mortgage Amount} = \text{Home Price} - \text{Down Payment}
\]

\[
\text{Mortgage Amount} = 350,000 - 70,000 = 280,000
\]

Thus, the amount of the mortgage is **\$280,000**.