638 CHAPTER 10 Consumer Mathematics Exercises $ All Exercises in this Section are related to financial literacy. Warm Up Exercises In Exercises 1– 6, fill in the blanks with an appropriate word, phrase, or symbol(s). 1. A long-term loan in which the property is pledged as security for payment of the difference between the sale price and the down payment is known as a homeowner’s _______. Mortgage 2. The amount of cash the buyer must pay to the seller before the lending institution will grant the buyer a mortgage is known as the payment. Down 3. Interest prepaid by the buyer, which may be used to reduce the stated interest rate the lender charges, are known as _______. Points 4. The final step of purchasing a home is called the _______. Closing 5. The buyer’s gross monthly income minus any fixed monthly payments with more than 10 months remaining is known as the buyer’s _______ monthly income. Adjusted 6. A list containing the payment number, payment on interest, payment on principal, and the balance of the loan is called a(n) _______ schedule. Amortization Practice the Skills In Exercises 7–10, use Table 10.4 to determine the monthly principal and interest payment for the mortgage. Mortgage Amount Rate Number of Years 7. $126,000 5.5% 10 $1367.43 8. $250,000 6% 15 $2109.64 9. $301,500 7% 25 $2130.94 10. $405,500 8.5% 30 $3117.94 In Exercises 11-14, use the principal and interest payment formula to determine the monthly principal and interest payment for the mortgage. Amount Financed (P) Annual Percent- age Rate (r) Number of Payments per Year (n) Time in Years (t) 11. $95,000 5% 12 15 $751.25 12. $132,000 3% 12 30 $556.52 13. $236,000 5.5% 12 25 $1449.25 14. $316,000 4.5% 12 20 $1999.17 Problem Solving 15. Prefabricated Home Joyce purchased a new prefabricated home with a selling price of $110,000. She used $25,000 she received as an inheritance as a down payment. To obtain a 10-year mortgage at a 7% interest rate, Joyce had to pay 2 points at the time of closing. a) What is the amount of the mortgage? $85,000 b) What is the cost of the 2 points? $1700 16. Down Payment and Points The Nicols are buying a house selling for $245,000. They pay a down payment of $45,000 from the sale of their current house. To obtain a 15-year mortgage at a 4.5% interest rate, the Nicols must pay 1.5 points at the time of closing. a) What is the amount of the mortgage? $200,000 b) What is the cost of the 1.5 points? $3000 17. Paying Points Martha is buying a house selling for $195,000. The bank is requiring a minimum down payment of 20%. To obtain a 20-year mortgage at 6% interest, she must pay 2 points at the time of closing. a) What is the required down payment? $39,000 b) What is the amount of the mortgage? $156,000 c) What is the cost of the 2 points? $3120 18. Cooperative Apartment Kareem is purchasing an apartment in a cooperative building. The apartment is selling for $875,000. To obtain a 30-year mortgage at 6.5% interest, Kareem must make a 15% down payment and pay 2.5 points at closing. a) What is the required down payment? $131,250 b) What is the amount of the mortgage? $743,750 c) What is the cost of the 2.5 points? $18,593.75 19. Buying a House Meghan is buying a house selling for $275,000. To obtain the mortgage, Meghan is required to make a 15% down payment. Meghan obtains a 30-year mortgage with an interest rate of 4%. a) Determine the amount of the required down payment. $41,250 b) Determine the amount of the mortgage. $233,750 c) Determine the monthly payment for principal and interest. $1115.96 20. Buying a Condominium Eraj is buying a condominium selling for $165,000. To obtain the mortgage, Eraj is required to make a 20% down payment. Eraj obtains a 25-year mortgage with an interest rate of 5%. SECTION 10.5
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