Question

2. Lee Hays has obtained a $240,000mortgage loan at 7.00% for 25 years.a. What is the monthly payment?b. What is the total amount paid?c. What is the total interest?

Answer 1

Given:

`\begin{gathered} Present-value=240000 \\ rate(r)=7\%=0.07 \\ n=term(in-months)=25*12=300 \end{gathered}`

To Determine: a. What is the monthly payment? b. What is the total amount paid?

c. What is the total interest?

Solution

Using the formula below

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

Substitute the given

`\begin{gathered} PMT=(240000*0.07(1+0.07)^(300))/((1+0.07)^(300)-1) \\ PMT=(16800(1.07)^(300))/((1.07)^(300)-1) \\ =(16800*\:1.07^(300))/(653331059.14479) \\ PMT=16800.0002 \end{gathered}`

The total amount paid is

`\begin{gathered} Amount-paid=PMT* n \\ =16800.00002*300 \\ =5040000.01 \end{gathered}`

The interest paid is

`\begin{gathered} Interest=Amount-paid)-Present-value \\ =5040000-240000 \\ =4800000 \end{gathered}`