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You graduate from a college and find a good paying job
You graduate from a college and find a good paying job. You decide that you want to buy a house. There is a house you like which is selling for $150,000 now. Suppose you pay 20% down and you qualify for a 3% APR, 20-year mortgage paid at the end of each month. How much would be your monthly payment? (rounded to the nearest dollar)?
Expert Solution
Computation of Monthly Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Monthly Payment = ?
Rate = 3%/12 = 0.25% compounded monthly
Nper = 20 years * 12 months = 360 months
PV = $150,000*(1-20%) = $120,000
FV = 0
Substituting the values in formula:
=pmt(0.25%,360,-120000,0)
PMT or Monthly Payment = $505.92 or $506
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