The price of a small cabin is ?$85,000. The bank requires a? 5% down payment. Th
ID: 2614816 • Letter: T
Question
The price of a small cabin is ?$85,000. The bank requires a? 5% down payment. The buyer is offered two mortgage? options: 20-year fixed at 9.5% or? 30-year fixed at 9.5%. Calculate the amount of interest paid for each option. How much does the buyer save in interest with the? 20-year option?
____ Find the monthly payment for the? 20-year option.
(Round to the nearest dollar as? needed.)
____ Find the monthly payment for the? 30-year option.
(Round to the nearest dollar as? needed.)
____ Calculate the total cost of interest for both mortgage options. How much does the buyer save in interest with the? 20-year option?
(Use the answers from parts 1 and 2 to find this? answer.)
Explanation / Answer
Monthly payment = [P x R x (1+R)^N]/[(1+R)^N-1]
P = Princpal amount
R = Rate of Interest
N = No of installments
on the basis of above formula monthly payment for first option will be = 752.7
Interest under first option is =(240*752.7) - 80750
= 99897
Monthly payment under 30 years option is = 679
Interest under first option is =(360*679) - 80750
= 163686
for choosing 20 years option buyer will save of = 163686-99897
= 63789
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.