Answer:
His yearly payment is $12507.095
Step-by-step explanation:
We are given
Chin Woo bought a home for $160,000
He put down 20 percent
It means that down payment is 20% of price of home
and he took loan of remaining amount
so, present value is 80% of 160000
[tex]PV=\frac{80}{100}\times 160000[/tex]
[tex]PV=128000[/tex]
The mortgage is at 8 1/2 % for 25 years
so, r=8.5%=0.085
t=25
now, we can use payment formula
[tex]P=\frac{r(PV)}{1-(1+r)^{-t}}[/tex]
now, we can plug values
[tex]P=\frac{0.085\times 128000}{1-(1+0.085)^{-25}}[/tex]
now, we can solve for P
we get
[tex]P=12507.095[/tex]
so,
His yearly payment is $12507.095
