Example 7 - Unknown Balloon Amount

This example applies to our online demo Time Value of Money Calculator. The C-Value! program for Windows works in a similar way and has a few more features. Note, our online demo TVM calculator is limited to calculations using interest rates between 4.0% and 5.99%

Note:This topic has not been proofed and images need to be added. However, we believe that the steps are complete and accurate.

Conventional loan or mortgage with a final unknown balloon payment amount. Regular periodic payments.

1. Click the [New] button to clear any previous entries.
2. Set "Rounding" to "Ignore" by either:

• clicking on the "Rounding" button on the toolbar;
• clicking on the {Compute} menu choice and select {Rounding...};

1. Set "Compounding" to "Monthly"
2. Enter 6.75% for the "Nominal Annual Rate".
3. Create a "Loan" event in row one of the cash flow input area.

1. 1. Set the "Date" to July 1, 2004 (07/01/2004)
   2. Set the "Amount" to 365,000.00
   3. Set the "# Periods" to 1.

3. Move to the second row of the cash flow input area. Select "Payment" for the "Event" type. For this example, we will assume we want to create a schedule for mortgage that has a balloon payment that is due after 5 years. (at the 60th monthly payment). We will also assume that the monthly payment is calculated based on a 30-year (360 monthly payments) loan.

1. 1. Set the "Date" to August 1, 2004 (08/01/2004)
   2. Set the "Amount" to "Unknown"
   3. Set the "# Periods" to 360. This tells C-Value! to calculate the payment as if the payment were based on a 30-year loan.

3. Calculate the unknown. The result is $2,367.38.
4. Now, to calculate the balloon change the 360 number entered in step 4(C) above to 60.
5. Move to the third row of the cash flow input area. Select "Payment" for the "Event" type.

1. 1. The date should be August 1, 2009, which is the end of the 5th year.
   2. Set the "Amount" to "Unknown"
   3. Set the "# Periods" to 1.

3. Calculate the unknown. The balloon payment due will be $344,573.94.
4. If you want to see a detailed amortization schedule showing how the monthly payment is allocated between principal and interest as well as the final balloon payment amount, click on the "Amortization" tab above the input area.

Variation: Rather than have C-Value! calculate the payment amount, you can enter your own payment amount. Instead of entering "Unknown" in step 4(B) above; enter the payment amount you prefer. Set the number of payments in step 4(C) to 60. Then skip to step 7.

Back to the online Time Value of Money Calculator.