Paytons' 15-Year 9% FRM Mortgage Payment Calculation

[amanda_]

Homework Statement

Rebecca and Tom Payton have decided to buy a home that costs $200,000. The Paytons can put down 20% of the home's price. They have applied for a 15-year, 9% FRM to finance the balance. They Paytons have a combined gross annual income of $70,000.

How much will the Paytons pay to satisfy their mortgage loan, if they make all the payments on time for the amount being financed?

The Attempt at a Solution

I don't know where to start.
I got 200,000(.20) = 40000
Then I don't know where to go after that.

 

[michonamona]

What does FRM stand for?

 

[hgfalling]

FRM in this context stands for "Fixed Rate Mortgage" (so the rate doesn't change over the life of the loan).

 

[eumyang]

Wouldn't the Present Value of an Annuity formula work for this problem?
$$PV = R\frac{1 - (1 + i)^{-n}}{i}$$

PV = the amount of the loan.
R = the amount of a payment.
i = the interest rate per period.
n = the number of equal payments.

The OP didn't state how often the payments need to be made. I'll assume monthly. Plug in 160,000 for PV (200,000 minus 20% down), .0075 for i (interest rate .09 divided by 12 months in a year), and 180 for n (15 years times 12 monthly payments in a year), and solve for R.


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