Section PF.12 – Practice Problems

Note: If your final answer is a dollar amount then it should be rounded to the nearest cent. (Be sure to review the special rounding rule for loan payments)

1. You can afford a $700.00 per month mortgage payment. You can get a loan at 5% interest for 30 years.

a. What is the largest loan you can afford?
b. How much total money will you pay the loan company?
c. How much of that money is interest?

2. Marie can afford a $250.00 per month car payment. She can get a loan at 7% interest for 5 years.

a. How expensive of a car can she afford?
b. How much total money will she pay the loan company?
c. How much of that money is interest?

3. You can afford a $1,500.00 per month mortgage payment. You can get a loan at 8% interest for 25 years.

a. How big of a loan can you afford
b. How much total money will you pay the loan company?
c. How much of that money is interest?

4. You can afford an $850.00 per month mortgage payment. You can get a loan at 6% interest for 30 years.

a. What is the largest loan you afford?
b. How much total money will you pay the loan company?
c. How much of that money is interest?

5. You want to buy a $28,000.00 car. You can make a 10% down payment, and will finance the balance with a 2% interest rate for 48 months (4 years). What will your monthly payments be?

6. You want to buy a $32,000.00 car. You can make a 10% down payment, and will finance the balance with a 5% interest rate for 36 months (3 years). What will your monthly payments be?

7. You want to buy a $200,000.00 home. You plan to pay 10% as a down payment, and take out a 30-year loan for the rest.

a. How much is the loan amount going to be?
b. What will your monthly payments be if the interest rate is 5%?
c. What will your monthly payments be if the interest rate is 6%?

8. Lynn bought a $300,000.00 house, paying 10% down, and financing the rest at 6% interest for 30 years.

a. Find her monthly payments.
b. How much interest will she pay over the life of the loan?

9. You want to buy a $25,000.00 car. The company is offering a 2% interest rate for 48 months (4 years). What will your monthly payments be?

10. You want to buy a $33,000.00 car. The company is offering a 4% interest rate for 36 months (3 years). What will your monthly payments be?

11. You want to buy a $16,000.00 car. The company is offering a 3% interest rate for 48 months (4 years). What will your monthly payments be?

12. You decide to finance a $12,000.00 car at a 3% interest rate for 4 years.

a. What will your monthly payments be?
b. How much interest will you pay over the life of the loan?

13. Emily bought a car for $24,000.00 three years ago. She financed the car and the loan had a 5-year term at a 3% interest rate. Her monthly payment is $431.25.

a. How much does she still owe on the car after three years?

b. If the car’s value is now $15,000.00 then how much equity does she have in the car now?

14. A friend bought a house 15 years ago, taking out a $120,000.00 mortgage at a 6% interest rate for 30 years. Her monthly payment is $719.47.

a. How much does she still owe on the mortgage after 15 years?

b. If the house’s value is now $280,000.00 then how much equity does she have in the house now?

15. The cost of a home you want to purchase is $200,000.00. To qualify for a mortgage, your lender wants a 10% down payment. Your mortgage interest rate is 3% for 30 years and you have to pay three points.

a. How much money do you need for the down payment?

b. How much will your mortgage be?

c. How much will you have to pay for the points?

d. What will your monthly mortgage payment be?

e. By the end of the loan, what will be the total of all your payments?

f. What is the total interest you will have paid on your mortgage by the end of the loan?

g. Construct the first three months of an amortization table for the mortgage.

16. The cost of a home you want to purchase is $140,000.00. To qualify for a mortgage, your lender wants a 20% down payment. Your mortgage interest rate is 5% for 15 years and you have to pay one point.

a. How much money do you need for the down payment?

b. How much will your mortgage be?

c. How much will you have to pay for the point?

d. What will your monthly mortgage payment be?

e. By the end of the loan, what will be the total of all your payments?

f. What is the total interest you will have paid on your mortgage by the end of the loan?

g. Construct the first three months of an amortization table for the mortgage.

17. You have purchased a car using a $11,000.00 loan at an interest rate of 4% for 5 years.

a. How much will your monthly payment be?
b. By the end of the loan, what will be the total of all your payments?
c. What is the total interest you will have paid by the end of the loan?
d. Construct the first three months of an amortization table for the car loan.

18. You have purchased a car using a $15,000.00 loan at an interest rate of 6% for 5 years.

a. How much will your monthly payment be?
b. By the end of the loan, what will be the total of all your payments?
c. What is the total interest you will have paid by the end of the loan?
d. Construct the first three months of an amortization table for the car loan.