You pay 20% down on a home with a purchase price of $300,000. Your bank will loan the remaining balance of $240,000 at 8% APR with a 30-year maturity. You will make monthly payments on the loan. What is the monthly annuity payment?
What will be an ideal response?
Answer: The bank will loan (1 - 0.2) × $300,000 = $240,000, and this is the PV.
The PVIFA using r = = 0.66667%, and n = 30 × 12 = 360 is: PVIFA = 136.28349.
The monthly annuity payment is: PMT = = = $1,761.03.
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