Question

Maurice took out a 25-year loan from his bank for $165,000 at an APR of 2.4%, compounded monthly. If his bank charges a prepayment fee of 6 months' interest on 80% of the balance, what prepayment fee would Maurice be charged for paying off his loan 11 years early? A. $818.55 B. $740.77 C. $585.55 D. $731.94

Answer 1

8118

Explanation:

Answer 2

First compute 25-11=14 years.
Computing the yearly interest:

`165,000(1+0.024)^(25)=298526`

`(298526)/(25)=11941,04/year`
After 14 years, the amount paid by maurice s the following:

`11941,04*11=\$131351`
So there remains

`298526-131351=\$167175`
Compute 80% of \$167175:

`\$167175*0.8=\$133740`
2.4/6=0.4%
Compute 0.4% of $133740:

`$133740*0.004=\$534`

The correct answer is C.