This Test: 175 pts possible 26 of 30 (24 complete) This Question: 12 pts rt. If

Question

This Test: 175 pts possible 26 of 30 (24 complete) This Question: 12 pts rt. If they can get a 25-year mortgage at 8% per year on the unpaid Acouple who wants to purchase a home with a price of$260,000 has $50,000 for a down paym balance, find each of the following (a) What will be their monthly payments? (b) What is the total amount they will pay before they own the house outright? (c) How much interest will they pay over the lde of the loan? (a) Their monthly payments would be approximately (Do not round until the final answer. Then round to the nearest hundredth as needed.) (b) They will pay a total amount of approximately sbefore they own the house outright. (Use the answer from part a to find this answer. Round to the nearest hundredth as needed.) (c) The total interest is approximately (Use the answer from part b to find this answer. Round to the nearest hundredth as needed.)

Explanation / Answer

(a). The mortgage loan payment formula is P = L[r(1 + r)n]/[(1 + r)n - 1] where L is the loan amount, P is the eriodic payment, r is the rate of interest per period and n is the no. of periods. Here, L = $260000-$50000 = $ 210000, n = 12*25 = 300, r = 8 %/12 = 8/1200 = 2/300( presuming monthly compounding) so that P = 210000(2/300)[(1+2/300)300 ]/ [(1+2/300)300 -1]= 1400(7.340175971/6.340175971) = $1620.81( on rounding off to the nearest cent).

(b). The total repayment is 300*$1620.81 = $ 486243.

(c ). The interest paid over the life of the loan is $ 486243-$ 210000 = $276243.

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