Internet Exercise.
1. How large is your monthly mortgage payment if you decide to borrow $200,000 (and no down payment) for 30 years at a 4.25% fixed annual rate of interest? You could answer this question with your calculator or by using Excel. Another way is to use the Bankrate.com website and plug the numbers from above into the mortgage calculator and find out. Once you are at the website, scroll to the bottom and you should see the "Amortization Calculator" tab; click on it. This should bring you to the "Amortization Schedule Calculator." Plug in the mortgage information from above; click the "Calculate" button.
2. Identify/show the keystrokes necessary if you had used your financial calculator instead to answer question 1. Check figure: (Using HP12C) n=360, i=(4.25/12)=0.3542, PV= -200,000, FV=0, and PMT=983.93.
3. Next, click on the "Show Amortization Schedule" button to view the monthly amortization table for this mortgage. How much of your first mortgage payment goes to pay the interest on the loan and how much is applied to the principal? Question
4. You noticed at the Bankrate.com website that the 15-year fixed rate mortgages had a lower interest rate than the 30-year mortgages. A shorter term mortgage will save you some interest expense but it will also mean that the monthly payments will be larger, maybe too large for your budget. To find out, use the Bankrate.com calculator to determine the monthly mortgage payment if you decide to borrow $200,000 for 15 years at a 3.75% fixed, annual rate of interest. For this mortgage, what is the amount of the mortgage payment?
5. Now use your financial calculator instead to answer question 4; identify/show the keystrokes you used with your calculator.