evaluate the annual cost of paying the loan

Maggie820

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First evaluate the cost of $500,000 worth house in KC, in the destination city, then use the $150,000 cash as %20 down payment, then finance the %80 by borrowing a fixed 30 years loan of 4.8% interest.
Evaluate the annual cost of paying the loan:

Payback of a fixed loan, to be paid back in n years, is done by charging the borrower a compound interest rate.(1)

Payback of borrwed $P in n years at fixed rate of ( r) is evaluated by following Formula: $P(1 + r)^n

destination is Amsterdam,NY cost of housing index is 91 and KC, MO is 90.8


This what I have so far

91 / 90.8 * $500,000 = $501,101
$501,101 * 0.20 = $100,220.2
$100,220.2*(1 + 4.8%)^30

I have to do what in the parentheses first and I get 174. What am I doing wrong?
 
Better stop hitting your calculator. I can't get 174 out of mine.
(1+.048)^30 =
(1.048)^30 =
4.081675545
 
Maggie820 said:
This what I have so far
91 / 90.8 * $500,000 = $501,101
$501,101 * 0.20 = $100,220.2
$100,220.2*(1 + 4.8%)^30
I have to do what in the parentheses first and I get 174. What am I doing wrong?

you multiplied 5.8 * 30 = 174 !

The 4.8 should be .048 (as Gene showed you), so 1 + .048 = 1.048

^30 means "to the power of 30"; in other words:
1.048 times 1.048 times 1.048 ...... (30 times!) .... = 4.0817~

If you can't find the proper "buttons" on your calculator,
you better read the manual...or ask someone who knows...

Also, I suggest you find out what (1 + i)^n means; until you do,
don't try that kind of calculation: you're wasting your time :wink:
 
Maggie820 said:
First evaluate the cost of $500,000 worth house in KC, in the destination city, then use the $150,000 cash as %20 down payment, then finance the %80 by borrowing a fixed 30 years loan of 4.8% interest.
Evaluate the annual cost of paying the loan:

Payback of a fixed loan, to be paid back in n years, is done by charging the borrower a compound interest rate.(1)

Payback of borrwed $P in n years at fixed rate of ( r) is evaluated by following Formula: $P(1 + r)^n

destination is Amsterdam,NY cost of housing index is 91 and KC, MO is 90.8


This what I have so far

91 / 90.8 * $500,000 = $501,101
$501,101 * 0.20 = $100,220.2
$100,220.2*(1 + 4.8%)^30

I have to do what in the parentheses first and I get 174. What am I doing wrong?

Did you remember to write the 4.8% as a decimal before adding to 1, then evaluating that to the 30th power?
 
Maggie820 said:
First evaluate the cost of $500,000 worth house in KC, in the destination city, then use the $150,000 cash as %20 down payment, then finance the %80 by borrowing a fixed 30 years loan of 4.8% interest.
Evaluate the annual cost of paying the loan:

Payback of a fixed loan, to be paid back in n years, is done by charging the borrower a compound interest rate.(1)

Payback of borrwed $P in n years at fixed rate of ( r) is evaluated by following Formula: $P(1 + r)^n

destination is Amsterdam,NY cost of housing index is 91 and KC, MO is 90.8


This what I have so far

91 / 90.8 * $500,000 = $501,101
$501,101 * 0.20 = $100,220.2
$100,220.2*(1 + 4.8%)^30

I have to do what in the parentheses first and I get 174. What am I doing wrong?

Before you start worrying about how to do the arithmetic, you need to make sure you have the right numbers in the formula. It has already been pointed out that 4.8% is 0.048 when written in decimal form. But another mistake is the value you have used for P....the amount borrowed.

$100,220.20 is the amount of the down payment. The amount you are borrowing is $501,101 - $100,220.20, and this is the value you need to use for P.

Make this substitution, and then follow the advice given by the other responders with regard to using your calculator.
 
Maggie820 said:
First evaluate the cost of $500,000 worth house in KC, in the destination city, then use the $150,000 cash as %20 down payment, then finance the %80 by borrowing a fixed 30 years loan of 4.8% interest.
Evaluate the annual cost of paying the loan:

Payback of a fixed loan, to be paid back in n years, is done by charging the borrower a compound interest rate.(1)

Payback of borrwed $P in n years at fixed rate of ( r) is evaluated by following Formula: $P(1 + r)^n

destination is Amsterdam,NY cost of housing index is 91 and KC, MO is 90.8
?
Well, the whole thing makes no sense to me...

IF $150,000 = 20% of price, then purchase = $750,000;
so borrowed is 600,000 at 4.8% ANNUAL; and looks like ANNUAL payments;
so $P(1 + r)^n makes no sense.

What is all this, Maggie? Are you a student learning financial formulas,
or a real estate agent with no idea what you're doing ? 8-)

If the purpose of this problem is to teach how to calculate periodic payments
that will pay off a loan, then the teacher that devised it should be shot at sunrise :evil:
 
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