Christine is considering a 3/27 balloon mortgage with an interest rate of 4.5% to purchase a house for $204,000. What will be her balloon payment at the end of 3 years?A. $225,368.29B. $190,245.98C. $193,666.55D. $197,533.62
Accepted Solution
A:
Given: loan amount - $204,000 interest rate per annum - 4.5% 4.5% / 12 months = 0.375% per month 3/27 - 3 years to pay, 27 years amortization 27 years * 12 months = 324 months
Using the attached formula to compute for the monthly amortization:
A = 204,000 * [0.00375(1+0.00375)³²⁴] / [(1+0.00375)³²⁴ - 1] A = 1,088.79
Keep in mind that there are slight differences in figures due to the decimal places used.