Question

You purchase a plot of land worth $52,000 to creath a community qarden. To do so, you secure a 10 -vear loan, charging 5.114 ADR, compounded monehly, and requiring monthly poyments of s sos. (Assume the value of the land is stil $52,000. Round each answer to the neareit dollac.) (a) Aswuming that you pot some money down, what was your originat loan arnount (in dolars)? (b) What is the outstanding balance (in dellars) on vour laan aher making 4 yean of payments? (c) How much equty (In dailars) do you have in the garden after 4 years?

Answer 1

Original Loan Amount = $47,306

Outstanding Balance after 4 Years = $31,231

Equity = $20,769

Here are the answers to the questions, calculated step by step:

a) Original Loan Amount:

The original loan amount is calculated using the present value formula, given the monthly payment, interest rate, and loan term.

Original Loan Amount = $47,306 (rounded to the nearest dollar).

b) Outstanding Balance after 4 Years of Payments:

The outstanding balance after 4 years is calculated by considering the remaining term of the loan (6 years) and the same monthly payment and interest rate.

Outstanding Balance after 4 Years = $31,231 (rounded to the nearest dollar).

c) Equity in the Garden after 4 Years:

Equity is calculated as the current value of the land minus the outstanding balance on the loan.

Current Value of the Land = $52,000.

Equity = $52,000 - $31,231 = $20,769 (rounded to the nearest dollar).

Therefore, the original loan amount was approximately $47,306, the outstanding balance on the loan after 4 years is about $31,231, and the equity in the garden after 4 years is approximately $20,769. ​