Scenario 3 Pre-Calc Finance Project
Lynn Zhu hour 2 Stein
Jenny has $1,373.17 to spend on mortgage every month
1. gross monthly income: $2,333.33
I multiplied her annual salary by 70% because 30% goes to taxes. Then I divided her gross annual salary by 12 to get her gross monthly salary.
2. student loan payment: $230.16 per month
I used the present value of an annuity equation to solve for her monthly payment. She owes $20,000 The interest rate is 6.8% and the loan must be payed back in 10 years.
3. money to spend on mortgage: $1,373.17
I subtracted her student loan payment (calculated in step 2), her car payment (given), and her living expenses (estimated $500) from her gross monthly income.
How will Jenny afford it?
down payment: $6,498
Bank of America requires a down payment of at least 5%
saving time: 5 months
Jenny will have to save for 5 months so that she can put a down payment on her house.
interest rate: 4.625%
Using the Bank of America monthly mortgage payment calculator, Jenny will pay $635 dollars a month for mortgage at an interest rate of 4.625%. She will pay monthly for 30 years.
How much time and money would she save if she increased the monthly payment by 15%?
the time to pay back would decrease to 25.08 years
A 15% increase of $635 is $730.25. By paying this much, Jenny would save about 5 years on her payments.