Monthly Payment Problem: The Bronff’s investment property

[Sharks12]

Monthly Payment Problem: The Bronff’s investment property

Hi guys,

I am wondering if you can confirm and possible assist with this problem

The problem:

The Bronff’s bought an investment property valued at $220,000.00 by paying 22% down and mortgaging the balance over 25 years through equal monthly payments at 6% compounded monthly. What was the size of the monthly payments?

My answer:

[FONT=&quot]Amountfinanced=$220,000-0.22($220,000)=$220,000-$48,400=$171,600[/FONT]
PV=PMT[1-(1+I)-n]/I
$171,600=PMT[1-(1+0.005)-300]/0.005
$171,600=PMT[1-(1.005)-300]/0.005
$171,600=PMT(1-0.22396568)/0.005
$171,600=PMT(0.77603432)/0.005
$171,600=PMT(155.206864)
$171,600/155.206864=PMT
PMT=$1,105.62

Does this seem correct?

 

[Ishuda]

Hi guys,

I am wondering if you can confirm and possible assist with this problem

The problem:

The Bronff’s bought an investment property valued at $220,000.00 by paying 22% down and mortgaging the balance over 25 years through equal monthly payments at 6% compounded monthly. What was the size of the monthly payments?

My answer:

Amountfinanced=$220,000-0.22($220,000)=$220,000-$48,400=$171,600
PV=PMT[1-(1+I)-n]/I
$171,600=PMT[1-(1+0.005)-300]/0.005
$171,600=PMT[1-(1.005)-300]/0.005
$171,600=PMT(1-0.22396568)/0.005
$171,600=PMT(0.77603432)/0.005
$171,600=PMT(155.206864)
$171,600/155.206864=PMT
PMT=$1,105.62

Does this seem correct?

Seems good to me and I don't know that I would have done it significantly different.

 

[Harry_the_cat]

Yep that's correct.

 

[Ishuda]

Why don't you simply use the payment formula:

P = Ai / [1 - (1 + i)^(-n)]

A = 171600
n = 300
i = .06 / 12 = .005
P = ?

Actually Sharks12 did but in a slightly modified manner
P [1 - (1 + i)^(-n)] / i= A
which may be how it was presented in class.