Question

Jimmy paid off a mortgage by paying $775 per month for 12 years. What was the original amount of the mortgage if the interest rate charged was 4.40% compounded semi-annually?

Answer 1

The original amount of the mortgage was $66231.45.

Explanation:

In order to find the original amount of the mortgage, you can use the following formula to calculate the present value:

PV=FV/(1+r/n)^nt

PV=present value

FV=future value= 775*12*12=111.600

r=rate of interest=0.0440

n= number of compounding periods= 2

t= time in years=12

Now, you can replace the values on the formula:

PV=111600/(1+(0.0440/2))^2*12

PV=111600/(1.022)^24

PV=111600/1.685

PV=66231.45

According to this, the answer is that the original amount of the mortgage was $66231.45.