Help with an immediate annuity problem

[raindancer]

Hey guys,

So I'm kinda stuck on this problem; I seem to have set up the problem correctly, but I keep getting the wrong answer no matter what I try.

If someone could point out what I'm doing wrong, it would be awesome.


The question:

The Smith family is looking to buy a new home. They find one they really like for $200,000. They can afford a monthly payment of $1,250. Their mortgage broker finds a rate of 7% convertible monthly for 30 year mortgages. How much of a down payment do they need to make?

The correct answer is: 12, 115.54

This is my work, I'm way off, but I'm pretty sure I set up the problem correctly:



Any help would be appreciated.

Thanks!

[Gandalf]

When you try to calculate the 360-payment annuity at i=.07/12, you correctly use (.07/12) in the 1-v^360, but then when you take (1-v^360)/i, you use .07 instead of .07/12

[raindancer]

Originally Posted by Gandalf

When you try to calculate the 360-payment annuity at i=.07/12, you correctly use (.07/12) in the 1-v^360, but then when you take (1-v^360)/i, you use .07 instead of .07/12

Wow, that was a careless/stupid mistake, can't believe I didn't see that lol. Thanks!

[Kaner3339]

Do you really need to include the dollar sign?

[raindancer]

Originally Posted by Kaner3339

Do you really need to include the dollar sign?

Yup. Lol


Sent from my iPhone using Tapatalk