Paste Format Painter For Clipboard Font Alignment Number 2 Problem 4-37 You are thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $300,000. At the end of the mortgage (in 30 years), you must make a balloon payment, that is, you must repay the remaining balance on the mortgage How much will this balloon payment be? 4 House price Down payment Loan amount Number of periods Interest rate Annual payment S 350,000 50,000 S 300,000 30 7% 23,500 10 12 14 15 16 PV of payments Loan- PV of payments Balloon payment 4-37