Question 1188460: Two people purchase a $90000 house using a down payment of $20000. They can amortize the balance at 5% over 30 years. What is the monthly payments, total interest paid, equity after 5 years, and equity after 25 years?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! the purchase price of the house is 90,000.
the down payment is 20,000.
the amount that needs to be amortized is 70,000.
using the ti-ba-ii business analyst calculator, i get:
monthly payments are 375.7751361.
the sum of those payments is equal to 360 * that = 135,279049.
the total interest paid is that minus 70,000 = 65,279.049.
the total equity paid after 5 years would be present value of those payments for the remainder of the loan from that point.
end of 5 years is the end of 5 * 12 = 60 months.
remaining number of months is 360 - 60 = 300
present value of payments of 375.75771361 for 300 months = 64,280.11246.
equity after 5 years is 70,000 - 64,280.11246 = 5,719.88754.
end of 25 years is the end of 25 * 12 = 300 months.
remaining number of months is 360 - 300 = 60.
present value of payrmnets of 375.75771361 for 60 months = 19,912.58988.
equity after 25 years is 70,000 - 19,912.58988 = 50,087.41012.
the month by month transactions can be seen in the following excel displays for the critical months (beginning of loan period, end of 5 years, end of 25 years, end of loan period).
you can duplicate the results i got from my ti-ba-ii calculator by using the online financial calculator at https://arachnoid.com/finance/index.html
the results from using that calculator are shown below:
built up equity after 5 years = 70,000 - 64,280.92 = 5,719.08.
built up equity after 25 years = 70,000 - 19,912.85 = 50,087.15.
these results are slightly different than what i got using the ti-ba-ii.
the difference is in the rounding of intermediate results.
the online calculator displays results to the nearest penny and uses those rounded results in the following calculations.
the ti-ba-ii uses the internally stored results that are unrounded.
the difference between the two is very small at the end.
for equity in the account after 5 years, ti-ba-ii allows me to get 5,719.88754, while online financial calculator allows me to get 5,719.08
for equity in the account after 25 years, ti-ba-ii allows me to get 50,087.41012, while online financial calculator allows me to get 50,087.15
this can also be done using your calculator and formulas.
i haven't shown you those, but can do so if you need them.
the results from the formulas should match the results from the ti-ba-ii because there will be no intgermediate rounding of results.
let me know if you have any questions.
theo
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