Time Value of Money Calculations
65
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Example: A Mortgage With a Balloon Payment
You’ve obtained a 25 year, 172,500 mortgage at 8.8% annual interest. You anticipate that
you will own the house for four years and then sell it, repaying the loan with a balloon
payment. What will your balloon payment be?
Solve this problem using two steps:
1. Calculate the loan payment using a 25 year term.
2. Calculate the remaining balance after 4 years.
Step 1
First calculate the loan payment using a 25 year term.
Table 6-5 Calculating the maximum purchase price
Keys Display Description
JG\Í
12.00 Sets periods per year.
D:\Ú
360.00 Stores the length of the
mortgage (30 × 12).
:É
0.00 Pays mortgage off in 30 years.
j7VÒ
7.50 Stores interest rate.
dD:yÌ
-930.00 Stores desired payment (money
paid out is negative).
Ï
133,006.39 Calculates the loan you can
afford with a 930 payment.
1JG:::4
145,006.39 Adds 12,000 down payment
for the total purchase price.
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