Part II: Selling the House

Suppose that after living in the house for 10 years, you decide to sell it. The economy experiences ups and downs, but in general the value of real estate increases over time.

Original purchase price = $202,000

To approximate the future value of an investment such as real estate, you will use the compounded interest formula

This is just an approximation, so we'll use an annual compounding period (so, k=1). Find the future value of the home 10 years after you purchased it assuming a 4%

interest rate. Use the full purchase price of the home from the previous problem (Question 1) as the principal (or initial value,P₀) in the compound interest formula.

Future value of home = $ 299009.35

This "Future value" is the price you will sell the house for after you've owned it for ten years. Now you will answer the question of whether or not you have made or lost money with this investment. You will need several pieces of information in order to answer the question. You will need the amount of your down payment (from Question 1), the amount you paid toward the mortgage over ten years (your monthly payment from Question 1 times the number of payments), and finally, the amount of principal you still owe on the mortgage.

Additional Info from part 1:

Down Payment = 20200

Loan Amount = 181800

The annual interest rate expressed as a decimal = 0.0474

Monthly Payment = 947.26

Total Payment = 341013.37

Total Interest paid = 159213.37

Minimum Monthly take-home = 2706.46

Minimum monthly gross pay = 3707.47

Minimum Annual gross Pay = 44489.68

Down payment = $

Mortgage paid over 10 years = $

To find the principal balance on the mortgage, you will use the Loan Formula

(In this formula,d is the monthly payment andr is the annual interest rate expressed as a decimal fromPart I, sor= ;N is the number of yearsremainingon the loan, and, of course, k=12.)

Principal balance on mortgage after 10 years = $

To determine whether or not you've made or lost money, you must compare the "expenses" (down payment + mortgage paid + principal balance) to the "return" (future value of the home). Find the total "expenses".

Expenses = $

After 10 years, did you lose or gain money from selling the house? Answer:

How much (did you lose or gain)? Answer: