Question

Cliff Branch bought a home with a 10.5% adjustable rate mortgage for 30 years. He paid $9.99 monthly per thousand on his original loan. At the end of 3 years he owes the bank $65,000. Since interest rates have risen to 12.5%, the bank will renew the mortgage at this rate, or Cliff can pay the bank $65,000. He decides to renew and will now pay $10.68 monthly per thousand on his loan. (You can ignore the small amount of principal paid during the 3 years.)

i cant figure this out

Answer 1

I'm Unsure, But Here's What I Found.

9.99×65=649.35

10.68×65=694.2

((10.68÷9.99)−1)×100=6.9%

Answer 2

The per thousand value of $65000 is
`65000/1000=65`

The old monthly payment was =
`9.99*65=649.35` dollars

Now after renewal, Cliff will now pay $10.68 monthly per thousand on his loan.

Hence, his new monthly payment is =
`10.68*65=694.20` dollars

The percent increase in his monthly payment will be :

`((10.68)/(9.99)) -1*100`

=
`(1.0690-1)*100` = 6.90%