Let’s suppose you would like to buy a home for $250,000. But like most U.S. citizens, you don’t have enough cash on hand to pay for the full house. But we’re in luck! Signature Bank has agreed to offer you a 30-year mortgage loan, but requires that you pay 20 percent down ($50,000 = 20% of $250,000) to qualify for their mortgage loan of $200,000 in this way:

 Let’s suppose you would like to buy a home for $250,000. But like most U.S. citizens, you don’t have enough cash on hand to pay for the full house. But we’re in luck! Signature Bank has agreed to offer you a 30-year mortgage loan, but requires that you pay 20 percent down ($50,000 = 20% of $250,000) to qualify for their mortgage loan of $200,000 in this way:
 
$250,000     Cost of home
50,000     Required 20% down payment ($50,000 = 20% of $250,000) (The
      cash you need to have available to pay when closing on the home)
$200,000     Amount of the bank loan

 

Software needed

    Excel
    Screen capture tool (Windows: Snipping Tool; Mac: Cmd+Shift+4)

 

Perform the Analysis: Refer to Lab 1-3 Alternative in the text for instructions and Lab 1-3 steps for each of the lab parts.

 

Share the Story: Accountants need to know how much of each monthly mortgage (or bond) payment goes toward interest.

 

 

Required:

1. What would be the monthly payment for 180 months, 6% annual interest and a $200,000 loan?

 

multiple choice 1

    $1,687.71 Correct
    $3,314.58
    $1,199.10
    $1,064.48

 

2. What would be the monthly payment for 72 months, 6% annual interest and a $200,000 loan?

 

multiple choice 2

    $1,199.10
    $3,314.58 Correct
    $1,687.71
    $1,064.48

 

3. For the 180-month mortgage, what is the amount that goes toward paying down principal in monthly payment number 20?

 

multiple choice 3

    $931.64
    $759.04
    $756.07 Correct
    $752.31

 

4. For the 72-month mortgage, what is the amount of interest expense in monthly payment number 3?

 

multiple choice 4

    $965.11
    $976.80 Correct
    $993.11
    $2,337.78

 

5. What is the total amount of interest paid over the life of the 180-month mortgage?

 

multiple choice 5

    $238,649.59
    $38,649.59
    $103,788.46 Correct
    $303,788.46