Question

Cheney is buying a house for $216,820. He made a down payment of $26,020 and will finance $190,800. He gets a 15 year fixed rate loan with a rate of 5.815%. How much interest will he pay over the life of his loan rounded to the nearest dollar?

A- $95,593
B- $134,649
C- $69,573
D- $108,629

Answer 1

The value of the Financing loan is PV=$190,800.

The Rate per month is 5.815%. Therefore, the Monthly Interest Rate,r = 0.4846%

We will use the formula:

`PV=PMT*(1-(1+r)^(-n))/(r)`

Where n=number of months in 15 years=12x15=180

and PMT=Payment every month, which is to be found.

Thus,
`190800=PMT*(1-(1+(0.4846)/(100) )^(-180))/((0.4846)/(100))\approx PMT* 119.92`

Thus
`PMT=(190800)/(119.92)\approx 1591.1`

Thus, in 180 months Cheney pays:
`1591.1* 180\approx 286391` dollars.

Thus Total Interest paid = $286,391 - $190,800= $95,590

Thus Option A is the closest correct option.

Answer 2

The answer is letter A. $95,593.

Cheney has a monthly payment of $1,591.07 based on 5.815%.