Math Problem Statement
Dave takes out a 26-year mortgage of 270000 dollars for his new house. Dave gets an interest rate of 15.6 percent compounded monthly. He agrees to make equal monthly payments, the first coming in one month. After making the 66th payment, Dave wants to buy a boat, so he wants to refinance his house to reduce his monthly payment by 400 dollars, and to get a better interest rate. In particular, he negotiates a new rate of 8.4 percent compounded monthly, and agrees to make equal monthly payments (each 400 dollars less than his original payments) for as long as necessary, followed by a single smaller payment. How large will Dave's final loan payment be?
Solution
Ask a new question for Free
By Image
Drop file here or Click Here to upload
Math Problem Analysis
Mathematical Concepts
Loan Amortization
Compound Interest
Refinancing
Monthly Payments
Formulas
Monthly payment formula: M = P * (r(1+r)^n) / ((1+r)^n - 1)
Remaining loan balance: B = P * ((1+r)^n - (1+r)^p) / ((1+r)^n - 1)
Theorems
-
Suitable Grade Level
College level or advanced high school (Grades 11-12)
Related Recommendation
Mortgage Refinancing Calculation: Dave's Loan with Reduced Payments
Mortgage Refinancing Problem: Calculating Final Payment After Interest Rate Change
Mortgage Refinancing with Compounded Interest and Final Loan Payment Calculation
Refinancing a 26-Year Mortgage: Dave's Loan and Final Payment Calculation
Calculating Final Payment After Refinancing a 26-Year Mortgage