Question

V gets a 10-year straight loan for $60,000 at an interest rate of 4% to finance the purchase of a vacation cottage in the hills. Every month, she pays the lender $200. In 10 years, how much will she owe the lender?

Answer 1

$60,000

Explanation:

Data provided in the question:

Duration of the loan = 10 years

Interest rate = 10%

Principle amount = $60,000

Monthly payment = $200

Now,

Total payment made in 10 years

= Monthly payment × Total months in 10 years

= $200 × 120

= $24,000

Total amount owed in 10 years

= Principle × ( 1 + rate × time)

= $60,000 × ( 1 + 0.04 × 10)

= $60,000 × ( 1.4 )

= $84,000

Thus,

Total amount owed after 10 years

= Total amount owed in 10 years - Total payment made in 10 years

= $84,000 - $24,000

= $60,000