Use [PMT = $P(\frac{r}{n})$
$=\frac{\left.r\left(1+\frac{r}{n}\right)^{-n t}\right]}{[1-10}$] to determine the regular payment amount, rounded to the nearest dollar. The price of a home is $218,000. The bank requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 7%. Complete parts (a) through (e) below.
a. Find the required down payment.
$
Answer (1)
43600
Explanation
Understanding the Problem We need to find the required down payment for a home that costs $218,000. The bank requires a 20% down payment. To find the down payment, we multiply the price of the home by the down payment percentage.
Calculating the Down Payment To calculate the down payment, we multiply the price of the home, which is $218,000, by the down payment percentage, which is 20% or 0.20. So, the calculation is: Do w n P a y m e n t = P r i ceo f Ho m e × Do w n P a y m e n tP erce n t a g e Do w n P a y m e n t = $218 , 000 × 0.20 Do w n P a y m e n t = $43 , 600
Final Answer The required down payment is $43,600.
Examples
When purchasing a home, understanding the down payment is crucial. For instance, if you're buying a car for $25,000 and need a 10% down payment, you'd calculate 0.10 \times $25,000 = $2,500. This principle applies to various purchases, helping you determine the initial amount needed. Knowing how to calculate down payments aids in budgeting and financial planning, ensuring you're prepared for significant investments.
