Suppose you want to buy a house that costs P1,000,000. You give a downpayment of P200,000, and

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Question:

Suppose you want to buy a house that costs P1,000,000. You give a downpayment of P200,000, and then you loan the remaining P800,000 from a bank. Your agreement with the bank is that you will pay for the mortgage on a monthly basis for 10 years and that the bank will charge a 3% interest rate, compounded monthly, on your loan. Determine the amount of your monthly payment.

II. Problem Solving Involving Interest Applied on a Mortgage

a. Amlong wants to purchase a car that costs P1,300,000. He will give a downpayment of P300,000, and then he will loan the balance from a bank that charges a 7.5% interest rate, compounded monthly. He also agreed to pay the bank monthly for 5 years.

1. How much is his monthly amortization?

2. How much is the total interest on his loan?

b. Suppose you are planning to apply for a housing loan. The lender offers different interest rates that reflect the differences in terms of the risks of shorter-term and longer-term loans. The following are the options that were given to you:

Option A: The mortgage will be paid on a monthly basis for 15 years at an interest rate of 6.25%, compounded monthly.
Option B: The mortgage will be paid on a monthly basis for 30 years at an interest rate of 6.75%, compounded monthly.
1. If you plan to borrow P2,400,000, how much will be your monthly amortization in each option?

2. Explain the advantages and disadvantages of each option.

III. Problem Solving

a. Engr. Wood sold his P3,000,000 property to Atty. Carolino. Atty. Carolino gave Engr. Wood a downpayment of P1,000,000 and loaned the remaining balance from a bank. If Atty. Carolino will pay the bank monthly for 10 years at an interest rate of 10%, compounded monthly, how much will be the monthly amortization?

c. Determine the monthly amortization for a 30-year mortgage of P6,000,000 at a 5% interest rate, compounded monthly. Then compute for the total interest of the loan.

a. A P2,300,000 property is sold to Mr. Andrion. He made a down payment of P500,000 and he plans to amortize the remaining balance. How much will be the mortgage?

b. In item a, if Mr. Andrion will pay for the amortization of his mortgage on a monthly basis for 7 years, what is the total number of payments that he has to make?

c. Consider items a and b again. If the bank offers him a 3% interest rate, compounded monthly, what will be the periodic interest rate?

d. Considering the given information in items a, b, and c, how much will be Mr. Andrion's monthly amortization?