Your cousin will sell you his coffee shop for $250,000, with "seller financing," at a 6.0% nominal annual rate. The terms of the loan would require you to make 12 equal end-of-month payments per year for 4 years, and then make an additional final (balloon) payment of $50,000 at the end of the last month. What would your equal monthly payments be

The selling price of the coffee shop is $250,000 with seller financing at a 6.0% nominal annual rate. We have to pay 12 equal ends of monthly payments for 4 years. At the end of the last month, we have to pay $50,000.
Paying $4,241.44 for a year equals $50,892. Then $50,892 for four years equals $203,568. After paying this amount at the end of the last month we should pay $50,000.
So this equals $250,000.

steffimarish steffimarish · Answer 2 · 2020-04-02T19:23:26+02:00

Equal monthly payment is$4947.10 .The Balloon payment $50,000 does not take a part in equated monthly payment for capital amount calculation but the interest of $50,000 will be added while calculating the interest

Explanation:

Calculation of monthly equalized installment $

Capital amount (250,000-50,000) 200,000

Interest for the I year[tex](250,000×6÷100 = 15000)[/tex] 15000

(250,000×6÷100 = 15000)

Interest for the II year[tex](187,500×6÷100 = 11250)[/tex] 11250

(187,500×6÷100 = 11250)

Interest for the III year[tex](125,000×6÷100 =7500)[/tex] 7500

(125,000×6÷100 =7500)

Interest for the IV year[tex](62,500×6÷100=3750)[/tex] 3750

(62,500×6÷100=3750) ----------------

Total amount for monthly payments $237,500

[tex]Equal monthly payment = 237,500÷48 =4947.10[/tex]

Equal monthly payment = 237,500÷48 =$4947.10

= $4947.10