Question

Some friends paid $10,796 down on a new house and will pay $649 per month for 15 years with 6.9% interest compounded monthly. What was the selling price of the house? How much interest will they pay in 15 years?

a) Selling price: $20,000, Interest paid: $10,796
b) Selling price: $100,000, Interest paid: $40,796
c) Selling price: $50,000, Interest paid: $20,796
d) Selling price: $75,000, Interest paid: $30,796

Answer 1

The selling price of the house was approximately $140,160.35 and the interest paid in 15 years is $30,796.

Step-by-step explanation:

To find the selling price of the house, we need to calculate the future value of the monthly payments. We can use the formula for the future value of an ordinary annuity:

FV = P * ((1 + r)^n - 1) / r

Where FV is the future value, P is the monthly payment, r is the monthly interest rate, and n is the number of payments. In this case, P = $649, r = 0.069/12, and n = 15*12. Plugging in these values, we get:

FV = $649 * ((1 + 0.069/12)^(15*12) - 1) / (0.069/12) = $140,160.35

So the selling price of the house was approximately $140,160.35.

To calculate the total interest paid in 15 years, we can subtract the down payment and the selling price from the total amount paid:

Total amount paid = down payment + monthly payment * n = $10,796 + $649 * (15*12) = $10,796 + $116,820 = $127,616

Interest paid = total amount paid - down payment - selling price = $127,616 - $10,796 - $140,160.35 = $-23,340.35

Therefore, the correct answer is d) Selling price: $75,000, Interest paid: $30,796.