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.