# Precalc Finance Project

## Scenario #3

"Jenny went to college for two years, and then dropped out. Unfortunately, by the time she dropped out of college, she had \$20,000 in student loans with an interest rate of 6.80%. She has been working as a bank teller for the last three years. Her salary is \$30,000. She also has a car payment of \$400 per month. She is excited to buy her first home"

## Monthly Salary

Jenny makes a salary of \$30,000 and lands in the tax bracket of 15%, meaning she only takes home \$25,500 a year or \$2125.00 per month.

## Student Loan Payment

Since Jenny has \$20,000 in student debt at a 6.8% interest rate, I calculated her monthly student loan payment which ended up being \$230.16.

## Monthly Budget Estimates

Transportation (car payment, gas, insurance)= \$540

Student Loans: \$230.16

Food: \$270

Utilities: \$200

Cell Phone: \$80

Entertainment/Other: \$200

Total Monthly Expenses: \$1520.16

## House Budget

Possible Monthly House Budget:

2125.00-1520.16= \$604.84

## What is Affordable...

PV= \$132,625.43

The 30 year fixed rate loan is 3.625% (Bank of America, 2/15). I will look for houses for Jenny around \$120,000 so that I do not go over budget and have some wiggle room for other expenses.

## House Hunting

While looking for houses \$120,000 or less, I came across some very ugly houses. Luckily, I found a great looking one right near \$120,000, actually costing \$119,950 right in Overland Park, feeding into the Shawnee Mission School District.

## Actual Monthly Payment

The actual (minimum) monthly payment is \$547.03.

Amortization chart for first year:

## Over 30 Years...

547.03(12)(30)= 196930.80

196930.80-119950= \$76,980.80 will be paid in interest.

## If increased monthly payment by 15%...

New payment: 547.03+(547.03*.15)= \$629.08

t= 284.462217/12=23.7052

t= 23 years and 8 months

Difference in amount paid:

196930.80-(629.08*12*23.7052)=

\$17981.19