You need a 30 year fixed rate mortgage to buy a new home for $400,000. Your mortgage bank will lend you the money at a 6% APR for a 360 month loan. You can only afford a monthly payment of $1000. How much down payment should you put at the time of purchase? Please show work.

You need a 30 year fixed rate mortgage to buy a new home for $400,000. Your mortgage bank will lend you the money at a 6% APR for a 360 month loan. You can only afford a monthly payment of $1000. How much down payment should you put at the time of purchase? Please show work.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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