# Pre-Calculus Finance Project

## Scenario #1

Hi, I’m Brent. I am a construction foreman and did not attend college. I am 24 years old, and my annual salary is \$50,000. I just purchased a \$23,000 car with a 6.50% 5 year car loan. I also want to by my first home in a few months!

## My Monthly Budget

Car Insurance: \$63.67

Food: \$281

Utilities: \$200

Cell Phone: \$40

Gas/Transportation/Entertainment:

\$7.99 (Hulu) + \$8.25 (Amazon Prime) + \$7.99 (Netflix) + \$82.58 (gas) + \$40 (internet and cable) + \$20 (gym membership)

Total Monthly Expenses: \$751.48

## How did I find the budget for my house?

I took my monthly salary and subtracted the monthly car loan payment and taxes. After that I took my monthly salary (2,466.65) and subtracted my monthly expenses (\$751.48) to find my possible budget (1,715.17).

## What kind of a house can I afford?

I used the present value equation and plugged in my monthly payment and interest rate of 4.053%. I concluded that I can afford a house for \$356, 973.19; however, I will purchase a house for \$319,000 to avoid maxing out my budget.

## My actual monthly payment

I plugged in the value of my house \$319,000 into the present value equation and realized my actual monthly payment is \$1532.72. Then I multiplied this number by 12 and 30 to find that I would actually pay \$551,799.20 over the course of the loan.

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

To find my new payment, I multiplied my monthly payment (1532.72) by .15 and then added 1532.71. My new payment is therefore \$1.762.63.

## How long to pay off new amount?

I plugged in my new monthly payment (\$1762.63) into the present value equation and concluded that it would take 23.351475 years to pay off my house with a 15% increase in monthly payment. The difference in total amount paid was \$551,779.20-(1762.63(12)(23.351471) which was \$57,859.08.