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© 2014 Pacific Crest
379
M
odel(s)
Exemplars and representations
M
odel
1: V
ideo
C
alculations
M
odels
Exemplars and representations
Show the calculations to verify the monthly payments and total costs that are given in the video available
on the companion website.
Step 1
.03765
225000,
.0031375,
30 12 36044
12
L
r
n
=
=
=
=
=
Step 2
360
360
.0031375(1.0031375)
225000
$1043.93 $1044
(1.0031375)
1
PMT
=
=
≈
−
Step 3
$1043.93 × 360 = $375,814.80 total payments
Step 4
$375,814.80 + 75,000 (down payment) = $450,814.80 total paid for the house.
Step 5
$450,814.80 – $300,000 = $150,814.80 interest
Step 6
Using Excel: =PMT(.0031375, 360,225,000)*360-75000 validates a total of $450,813.40
Similar computations will validate the monthly payments for the 5.354% mortgage.
M
odel
2: P
lanning
for
B
uying
a
C
ar
and
H
ouse
YOUR
TURN!
Scenario:
Suppose that you want to purchase a new car and home, now that you are close
to graduation. Scan the classified ads in your local paper or online to find the
car and house that you would like to buy. Assume that you can pay a 10% down
payment on the price of each and that you will finance the remainder. For the
car, assume you can get a 5-year loan at 2.59 %; for a house, use a 30-year fixed
rate loan and assume a 3.88 % interest rate. Calculate your monthly payments
and the total you will eventually pay for each.
House
Car
Monthly payments
Total paid for each
C
ritical Thinking Questions
Developing your understanding
1. Which Excel Financial Function would you use to calculate the monthly payments on a major
purchase?
8.3 Credit and Loans