Christine is considering a 3/27 balloon mortgage with an interest rate of 4.5% to purchase a house for $204,000. What will be her balloon payment at the end of 3 years?A. $225,368.29B. $190,245.98C. $193,666.55D. $197,533.62

Given:
loan amount - $204,000
interest rate per annum - 4.5%
4.5% / 12 months = 0.375% per month
3/27 - 3 years to pay, 27 years amortization
27 years * 12 months = 324 months

Using the attached formula to compute for the monthly amortization:

A = 204,000 * [0.00375(1+0.00375)³²⁴] / [(1+0.00375)³²⁴ - 1]
A = 1,088.79 

Keep in mind that there are slight differences in figures due to the decimal places used.


FV = 204,000(1+0.00375)³⁶ - 1,088.79 {[(1+0.00375)³⁶ - 1] / 0.00375}
FV = 233,426.56 - 41,885.72
FV = 191,540.84

The closest to my answer is Choice B. B. $190,245.98