Amortization Project
Part 1
You are a real estate agent who is helping a couple with three children find a home. The
husband is an accountant who makes $75,000 per year and the wife stays at home, but has a
side business in which she makes cakes. She makes an average of $20,000 a year. They have
asked you to help them find a home in Jacksonville, FL that could accommodate the size of their
family. They have $80,000 in their savings that they can use towards a downpayment. They
have preferences in buying a home that is a 10 minute drive to the beach/river and a 10 minute
drive to the closest shopping center.
1. What budget would you recommend for this family before they purchase a home? Why?
350,000 because it keeps monthly payments affordable based on their income
2. Find a home for them within that budget that also accommodates their preferences
([Link]).
Street address: 8475 Cheryl Ann Ln,
Jacksonville, FL 32244
Home price: $238,500
Pros: Big garage
Cons: Small backyard
3. They decide to purchase this house. If they use the $80,000 in their savings account
towards a down payment, how much do they need to take out as a loan?
270,000
350,000-80,000=270,000
4. Calculate their monthly payment. Assume that they have a 30-year loan with an APR of
7.4%.
1,869.43
5. Create a spreadsheet and complete an amortization table for the life of the loan.
(starting template)
Schedule Schedule Schedule Schedule Schedule Schedule
1 270,000 1869.43 1,665.00 204.43 269,795.57
2 269,795.57 1,869.43 1,663.74 205.69 269,589.88
6. At which payment will the couple begin paying more off their principal than they will in
interest?
250
7. How much will the couple pay in interest over the life of the loan?
402,994.80 orr 52,994.80
Part 2
You earn 6% commission for selling that house to the couple in part 1. You plan to use that
money to purchase a car.
8. How much money do you earn selling the house? This is the budget for your car.
238,000 x 0.06 =14,310
9. Search online for a car to purchase within your budget.
Make, model, year: 2018 Ford Fiesta SE
Number of miles: 55,969
Pros: Safety features include automatic emergency braking, backup camera, and stability
control.
Cons: manual transmission noy automatic
Cost: $10,749
10. You decide that it’s more financially beneficial to save the money you earned from the
house and you choose to take out a loan to purchase the car instead.
a. If you invest your money in a savings account with an interest rate of 4.3%,
compounded daily, how much money will be in your account after 5 years?
(throwback to Ch.2)
A = P x (1 + r/n)^nt
17,742.20
b. To purchase the car you find a 5-year loan with an APR of 5.7%. What will your
monthly payment be?
206.31
11. Add a sheet to your spreadsheet. Complete an amortization table for the life of this loan.
12. At which payment will you begin paying more off your principal than you will in interest?
Month 1 your always paying more principal than intrest
13. How much will you pay in interest over the life of the loan?
1,626.60
14. Provide a summary of how an amortization schedule can be a helpful tool to businesses
and investors.
They can help businesses budget and for investors it helps them see if their investment is worth
it before paying the amount