B D E G H 41 7 6. Assume that you plan to pay an extra $200 per month on top of your mortgage payment, calculate how long it will take you to pay off the loan given the higher payment. (Use the corresponding interest rate in questions 1, 2, and 3). Calculate how much interest you will pay in total? Compare this to the value that you calculated for the 4th question. 42 43 Periodic Payment PV of Loan Periodic Rate Months Total interests 44 Scenario 1 45 Scenario 2 46 Scenario 3 8 48 A B C D E F G H You are planning to purchase a house that costs $600,000. You plan to put 20% down and borrow the remainder. Based on your credit score, you believe 2 that you will pay 4.5% on a 30-year mortgage. 3 4 1. Use the function "PMT" to calculate your mortgage payment. 5 House costs 6 Down payment 7 PV of loan (PV) # of periods (T) 9 Periodic interest rate (r) 10 Payment amount (pnt) 11 12 13 2. Use the function "PV" to calculate the loan amount given a payment of $2,000 per month. What is the most that you can borrow? 14 Payment amount (pnt) 15 # of periods (T) 16 Periodic interest rate (r) 17 PV of loan (PV) 18 19 20 3. Use the function "RATE" to calculate the interest rate given a payment of $2,200 and a loan amount of $500,000. 21 PV of loan (PV) 22 Payment amount (pmt) 23 # of periods (T) 24 Periodic interest rate (r) 25 APR 26 27 4. For each scenario, calculate the total interest that you will have paid once the mortgage is paid off. (There is not a function for this, enter the formula 28 into the cell.) 29 PV of Loan (principle) Total Payments Total Interests 30 Scenario 1 31 Scenario 2 32 Scenario 3 33 34 35 5. For each scenario, calculate the total cost of the home purchase. (Down payment plus principal (loan amount) plus interest.) 36 Down Payments Total Payments Total costs 37 Scenario 1 38 Scenario 2 39 Scenario 3 49 You want to determine whether you should save some of your money and put only 10% down on your house. Because you are only putting 10% down, 50 lenders require that you purchase private mortgage insurance (PMI). Assume that PMI is 1% of the mortgage amount per year. 51 52 7. Calculate your total monthly payment (mortgage payment plus PMI). 53 House costs 54 Down payment 55 PV of loan (PV) 56 # of periods (T); 57 Periodic interest rate (r): 58 Payment amount (pnt): 59 PMI 60 PMI Payment per month 61 Total Payment per month 62 63 64 8. Calculate the total cost of financing your home purchase (interest plus PMI). 65 Total costs of financing 66 67 68 9. Calculate the total cost of the home purchase. (Down payment plus principle (loan amount) plus interest plus PMI.) 69 Total costs of home 70 71 72 10. Compare this to the costs associated with a 20% down payment. 73 Difference 40
