Example: A Mortgage With a Balloon Payment. <RX•YHREWDLQHGD \HDUPRUWJDJHDWDQQXDOLQWHUHVW<RXDQWLFLSDWHWKDW \RXZLOORZQWKHKRXVHIRUIRXU\HDUVDQGWKHQVHOOLWUHSD\LQJWKHORDQ ZLWKDEDOORRQSD\PHQW:KDWZLOO\RXUEDOORRQSD\PHQWEH"

6ROYHWKLVSUREOHPXVLQJWZRVWHSV

 &DOFXODWHWKHORDQSD\PHQWXVLQJD\HDUWHUP  &DOFXODWHWKHUHPDLQLQJEDODQFHDIWHU\HDUV

Step 1. )LUVWFDOFXODWHWKHORDQSD\PHQWXVLQJD\HDUWHUP

PV = 172,500

 

 

I/YR = 8.8%

 

 

 

N = 25 ￿12

 

 

 

P/YR = 12

 

 

 

. . .

 

 

1

2

299

300

PMT = ?

End Mode

6HWWR(QGPRGH3UHVV*OLIBEGINDQQXQFLDWRULVGLVSOD\HG

Keys: b

Display:

Description:

￿*U

12.00

6HWVSHULRGVSHU\HDU

 

300.00

6WRUHVOHQJWKRI

 

 

PRUWJDJH ï 

/

 

PRQWKV 

 

0.00

6WRUHVORDQEDODQFH

￿￿￿￿

 

DIWHU\HDUV

 

172,500.00

6WRUHVRULJLQDOORDQ

￿￿￿.

 

EDODQFH

 

8.80

6WRUHVDQQXDOLQWHUHVW

2

 

UDWH

 

–1,424.06

&DOFXODWHVPRQWKO\

 

 

SD\PHQW

58 5: Time Value of Money Calculations

Page 58
Image 58
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