Question

Mikal purchases a $200,000.00 home, puts 20% down, and finances the rest over 20 years at a 4.7% rate compounded monthly. How much does Mikal pay in total interest over the life of the loan?

Answer 1

Explanation:

First of all let's see how much he paid before the loan

20% of $200 000

`(20)/(100) * 200000 = 40000`

So Mikal paid $40 000 of the $200 000.

The remaining balance is $200 000,00 - $40 000,00 = $160 000,00

So this is the amount that will be paid by loan which he will repay monthly

P = $160 000

i = 4.7/100×12 = 4.7/1200 ( compounded monthly)

n = 20 × 12 = 240 months

A = P ( 1 + I) ^n

`= 160000(1 + ( (4.7)/(1200)) ) {}^(240)`

A= $408845. 6800

That is the amount that he will pay in total over the life of the loan