Results 1 to 4 of 4

Math Help - Finance word problem help

  1. #1
    Newbie
    Joined
    Jul 2010
    Posts
    7

    Finance word problem help

    Can someone please tell me how i solve this ? thanx


    A couple wants to buy a house and can afford to pay $1400 per month.

    a) if they can get a loan for 30 years with the interest at 8% per year on the unpaid balance, how much can they pay for the house?

    b) what is the total amount paid over the life of the loan?

    c) what is the interest paid on the loan?


    I think the answer to part A is $463,680. is that right ? but i dont know how to do parts b and c. thanks
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Master Of Puppets
    pickslides's Avatar
    Joined
    Sep 2008
    From
    Melbourne
    Posts
    5,236
    Thanks
    29
    a)  A = P\left( 1+\frac{r}{n} \right)^{n\times t}

     1400\times 12\times 30 = P\left( 1+\frac{8}{12} \right)^{12\times 30}

    Solve for P

    b)  1400\times 12\times 30

    c)  I= A-P
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Super Member

    Joined
    May 2006
    From
    Lexington, MA (USA)
    Posts
    11,905
    Thanks
    765
    Hello, Stephen!

    This is an Amortization problem.
    You should have been given this formula:

    A \;=\;P\cdot\dfrac{i(1+i)^n}{(1+i)^n-1}

    . . where: . \begin{Bmatrix}A &=& \text{periodic payment} \\ P &=& \text{principal borrowed} \\ i &=& \text{periodic interest rate} \\ n &=& \text{number of periods} \end{Bmatrix}



    A couple wants to buy a house and can afford to pay $1400 per month.

    a) If they get a loan for 30 years with 8% interest per year on the unpaid balance,
    how much can they pay for the house?

    We have: . \begin{Bmatrix}A &=& 1400 \\ i &=& \frac{0.08}{12} &=& \frac{1}{150} \\ n &=& 12\cdot30 &=& 360 \end{Bmatrix}


    \text{Then: }\;1400 \;=\;P\cdot\dfrac{\frac{1}{150}\left(1 + \frac{1}{150}\right)^{360}} {\left(1+\frac{1}{150}\right)^{360}-1}

    Solve for P\!:\;\;P \;=\;190,\!796.8927


    They can pay up to \$190,\!796.89 for the house.




    b) What is the total amount paid over the life of the loan?

    $1400 per month for 360 months: . \$504,\!000




    c) What is the interest paid on the loan?

    Total interest is: . \$504,\!000 - 190,\!796.89 \;=\;\$313,\!203.11

    Follow Math Help Forum on Facebook and Google+

  4. #4
    Newbie
    Joined
    Jul 2010
    Posts
    7
    Thanks so much for the help. I was actually shown how to do this kind of problem on my calculator but couldn't remember how. thanks again
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Mathematical Finance - simple problem
    Posted in the Business Math Forum
    Replies: 1
    Last Post: November 3rd 2009, 08:40 PM
  2. Finance - Compounding Interest problem
    Posted in the Business Math Forum
    Replies: 1
    Last Post: May 21st 2009, 09:28 PM
  3. Finance annuity problem
    Posted in the Pre-Calculus Forum
    Replies: 3
    Last Post: April 6th 2008, 05:36 PM
  4. Finance annuity problem
    Posted in the Business Math Forum
    Replies: 0
    Last Post: April 6th 2008, 10:54 AM
  5. Finance Problem
    Posted in the Business Math Forum
    Replies: 0
    Last Post: November 25th 2007, 11:58 AM

Search Tags


/mathhelpforum @mathhelpforum