Murphy obtains a 15/5 mortgage to finance $133,500 at 4.95%. How much principal and interest will he have already paid when his balloon payment is due?
Julie and Brian are financing $245,000 to purchase a house. They obtained a 30/5 balloon mortgage at 5.25%. What will their balloon payment be?
Choices for question 1:
$85,433.10
$70,863.13
$52,781.40
$53,676.00
Chocies for question 2:
$223,884.91
$226,753.98
$229,679.66
$234,068.73
This is the formula you use to calculate the monthly payment:
PMT=PV. R.{[1 + R]^N/ [1 + R]^N - 1}
1 - The monthly payment is =$1,052.24. This amount, however, multiplied by 60 months=$63,134.14.
This last amount DOES NOT agree with any of your 4 choices. It is out by as much as $12,000, which is ridiculous!!. There is a major mistake somewhere. Look into it.
2- The monthly payment is=$1,352.90. The balance of the mortgage AFTER the 60th payment should be=$225,766.25. The amount of the balloon payment should be=$225,766.25 + $1,352.90=$227,119.14. Again, this amount DOES NOT agree with any of your 4 choices!!. However, I do see what your teacher is doing in this case, which is, strictly speaking, not accurate!!. He/She is taking the balance of the mortgage after the 61st. payment, which comes to=$225,401.07 + $1,352.90(one additional payment!!!!????) =$226,753.97, which comes to 62 payments, which agrees with your second choice!!. Why? I'm at a loss to explain the reasoning behind this very unusual and unconventional calculation!!. Talk to your teacher about it. Good luck to you.
