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question 242

Multiple Choice

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Effect of Down Payment on the Cost of a $\$ 120,000$ Home with Interest at $8 \%$


$\begin{array}{cccc}\text { Down Payment } & \text { Percent of House Price } & \begin{array}{c}\text { Monthly Payment } \\30 \text { Years }\end{array} & \begin{array}{c}\text { Total Payment } \\30 \text { Years }\end{array} \\\$ 0 & 0 \% & \$ 880.52 & \$ 316,987 \\\$ 6,000 & 5 \% & \$ 836.49 & \$ 301,136 \\\$ 12,000 & 10 \% & \$ 792.47 & \$ 285,289 \\\$ 24,000 & 20 \% & \$ 704.41 & \$ 253,588 \\\$ 30,000 & 25 \% & \$ 660.39 & \$ 237,740 \\\$ 36,000 & 30 \% & \$ 616.36 & \$ 221,890\end{array}$ If you are obtaining a $120,000 home with a 30-year 8% loan, what would you save in the total payments by increasing your down payment from $6,000 to $36,000?

• A) $79,246
• B) $23,773.80
• C) $220.13
• D) $221,890
• E) $616.36

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Definitions:

Deferred Annuity

An insurance contract in which payment of annuities is delayed to a future date.

Compounded Annually

The process where interest is calculated and added to the principal amount once every year, leading to an increase in the interest amount for the following year.

Deferral Period

A set period during which payments of principal or interest on a loan are temporarily delayed.

Perpetual Scholarship

A scholarship fund that provides financial aid indefinitely, usually through an endowment that generates interest used to fund the scholarship.