Natasha plans to buy a house that cost $229,000. She has saved 20% for a down payment and plans to finance the rest. Through her local Credit Union, she has a choice of either a 20-year fixed rate loan at 3.4% or a 5/1 ARM at 3.25%.

Question

1. How much does Natasha need to borrow? Answer

2. What is her monthly payment under the 20-year fixed option? Answer

3. What is her monthly payment under the ARM option? Answer

4. Under the 20-year fixed option, how much does she owe on the house after 5 years? Answer

5. Under the ARM option, how much does she owe on the house after 5 years? Answer

Answer 1

she has to borrow .8(229000) or $183,200

for Credit Union:
i = .034/12 = .0028333...
n = 20(12) = 240

paym(1 - 1.0028333..^-240)/.00283333.. = 183200
I get a paym of $1053.10 per month

balance after 5 years
= 183200(1.00283333)^60 - 1053.10(1.0028333..^60 - 1)/.0028333..
you should get $148327.00

Since I don't live in the US, I have no idea what is meant by
" a 5/1 ARM at 3.25%"