You put 20% down on a home with a purchase price of $300,000.The down payment is thus $60,000,leaving a balance owed of $240,000.The bank will loan the remaining balance at 4.28% APR.You will make annual payments with a 20-year payment schedule.What is the annual annuity payment under this schedule?
A)$18,100.23
B)$22,625.29
C)$12,000.00
D)$33,785.23

Question

Quizplus · Accepted Answer

To calculate the annual payment under a 20-year payment schedule, we can use the formula for an annuity payment:

Annual payment = (Loan amount) x (Discount factor)

The discount factor is calculated using the following formula:

Discount factor = (1 - (1 + r)^-n) / r

Where r is the annual interest rate and n is the number of payment periods.

Plugging our numbers in, we get:

Annual payment = ($240,000) x ((1 - (1 + 0.0428)^-20) / 0.0428)
Annual payment = $18,100.23

Therefore, the best choice is A.

You Put 20% Down on a Home with a Purchase