Problem:
You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 7.5 percent APR for this 360-month loan, with interest compounded monthly. However, you can only afford monthly payments of $850, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment.
Required:
Question: What will be the amount of the balloon payment if you are to keep your monthly payments at $850?
- $1,112,464
- $1,113,316
- $1,114,480
- $1,115,840
- $1,116,315
Note: Please show how to work it out.