Larry Davis borrows $85,000 at 12 percent interest toward the purchase of a home. His mortgage is for 30 years. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments b. How much interest will he pay over the life of the loan? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments c. How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage? Assume current interest rates are 10 percent. Carefully consider the time value of money. Disregard taxes. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments 1 Appendix D Present value of an annuity of $1, PVIFA 1- PVA = A (1 + i)" Percent Period 1% 3% 4% 7% 10% 11% 1 .................. 12% 0.893 0.971 5% 0.952 1.859 9% 0.917 1.759 2% 0.980 1.942 2.884 3.808 2 1.913 1.690 3............... 0.990 1.970 2.941 3.902 4.853 5.795 2.723 2.531 3.240 2.402 3.037 4 ............... 5 4.713 3.605 6 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 5.601 6.472 7.325 8.162 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.728 7.652 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 3.890 4.486 5.033 5.535 5.995 4.111 4.564 4.968 5.328 8 9 10 8.566 9.471 10.368 6.418 6.805 11 8.983 9.787 10.575 11.348 12 11.255 7.161 7.487 13 5.650 5.938 6.194 6.424 6.628 12.134 10.635 8.853 8.358 7.904 6.814 7.103 7.367 9.986 10.563 6.750 14 13.004 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 14.094 15.372 17.159 18.256 12.106 9.295 8.244 7.786 6.982 15 12.849 11.118 9.712 8.559 8.061 7.606 7.191 6.811 16 11.296 11.938 12.561 13.166 13.754 13.865 14.718 15.562 16.398 6.974 13.578 14.292 11.652 12.166 8.851 9.122 9.372 8.313 8.544 17 7.379 7.549 7.702 18 14.324 9.604 8.745 9.108 9.447 9.763 10.059 10.336 10.594 11.654 12.409 13.332 19 20 14.992 15.678 16.351 19.523 22.396 27.355 31.424 17.226 18.046 22.023 25.808 32.835 39.196 10.106 10.477 10.828 11.158 11.470 12.783 13.765 15.046 15.762 12.659 13.134 13.590 15.622 17.292 19.793 21.482 8.756 8.950 9.129 9.823 25 14.877 17.413 19.600 23.115 25.730 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 9.818 10.675 11.258 11.925 7.120 7.250 7.366 7.469 7.843 8.055 8.244 7.839 7.963 8.422 8.694 8.951 9.042 30 40 10.274 10.757 10.962 50 13.801 12.233 8.304 Appendix D (concluded) Present value of an annuity of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.870 0.862 0.840 0.741 0.847 1.566 0.800 1.440 0.769 1.361 2 0.855 1.585 2.210 0.667 1.111 1.668 1.647 1.547 1.626 2.283 1.289 0.833 1.528 2.106 2.589 0.714 1.224 1.589 1.605 2.246 2.798 3 2.361 2.322 2.174 2.140 1.952 1.696 1.407 1.816 2.166 4 2.855 2.743 2.690 2.362 1.997 1.849 1.605 2.974 3.517 2.914 3.433 3.889 2.639 3.058 5 3.352 3.274 3.199 2.991 2.689 2.436 2.220 2.035 1.737 3.127 3.498 6 3.998 3.784 3.685 3.589 3.410 3.326 2.951 2.643 2.385 2.168 1.824 7 4.288 3.812 3.605 2.802 2.263 1.883 4.160 4.487 3.161 3.329 2.508 2.598 8 3.922 4.207 4.451 4.639 4.078 3.837 2.331 1.922 9 2.925 3.019 4.423 4.799 5.132 5.426 5.687 5.918 4.039 4.344 4.607 4.833 5.029 4.303 4.946 5.216 3.706 3.954 4.163 4.339 4.486 4.031 4.192 2.665 2.715 2.379 2.414 1.948 1.965 10 4.772 5.019 5.234 5.421 3.463 3.571 3.656 4.659 4.494 3.092 3.147 11 5.453 2.438 1.977 4.836 4.988 4.656 4.793 4.327 4.439 12 5.660 4.611 3.725 2.456 1.985 5.197 5.342 13 6.122 6.302 6.462 14 5.842 6.002 6.142 6.265 5.118 5.229 5.324 4.910 5.008 5.092 4.715 4.802 4.876 5.468 5.575 5.668 4.533 4.611 4.675 2.752 2.779 2.799 2.814 2.825 3.780 3.824 3.859 3.887 3.190 3.223 3.249 3.268 3.283 5.583 5.724 5.847 5.954 6.047 6.128 2.469 2.478 2.484 15 1.990 1.993 1.995 1.997 1.998 16 6.604 5.405 5.162 4.938 4.730 2.489 2.834 2.840 17 6.729 6.373 5.475 5.222 4.775 3.295 2.492 4.988 5.033 3.910 3.928 18 5.749 5.818 5.877 6.840 6.467 5.534 5.273 4.812 3.304 2.844 2.494 1.999 19 6.550 6.198 5.584 5.316 4.843 3.942 2.496 1.999 6.938 7.025 5.070 5.101 2.848 2.850 20 6.623 6.259 5.929 5.628 5.353 4.870 3.311 3.316 3.329 2.497 3.954 3.985 1.999 25 7.330 4.948 6.873 7.003 5.766 5.829 30 6.097 6.177 6.233 7.496 2.856 2.857 5.467 5.517 5.548 5.195 5.235 5.258 6.464 6.566 6.642 6.661 4.979 3.995 3.332 2.499 2.500 2.500 2.000 2.000 2.000 40 7.105 5.871 4.997 3.999 3.333 2.857 7.634 7.675 50 7.133 6.246 5.880 5.554 5.262 4.999 4.000 3.333 2.857 2.500 2.000
