Question

Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for $39,000. Assuming that she puts 20% down, what will be her monthly payment and the total cost of interest over the cost of the loan for each assumption

Answer 1

Calculating Harriet Marcus's monthly mortgage payment and total interest paid requires the interest rate and loan term, which are missing in the question. Using the present value of an annuity formula, one can determine the maximum loan amount and total payment over the term with an interest rate of 4.2% annually, as in Joanna's example.

Step-by-step explanation:

Assuming Harriet Marcus wants to buy a small cottage priced at $39,000 and plans to put down 20%, she would initially pay $7,800 (which is 20% of $39,000) and finance the remaining $31,200. Calculating her monthly payment and the total cost of interest over the course of the loan would require additional information such as the interest rate and the loan term. These details are not provided within the question, but typically a mortgage is amortized over a period like 30 years with a fixed interest rate.

In the example you've provided, Joanna is able to afford $12,000 a year for a house loan. To calculate the maximum loan she can afford with a 4.2% annual interest rate over 30 years, we use the present value of an annuity formula. Similarly, once the loan amount is known, multiplying the annual payment by the number of years (30) and adding the interest will give us the total amount she ends up paying after 30 years.

To compare with the example of Harriet Marcus, applying the same method with the correct interest rate and term would provide the financing details she is concerned about.

Answer 2

Incomplete question. Here's the remaining part that completes question;

(Use the Table 15.1(a) and Table 15.1(b)). (Round intermediate calculations and your final answers to the nearest cent.)

Monthly payment

a. 25 Years, 10.5%

b. 25 Years, 11.5%

c. 25 Years, 12.5%

d. 25 Years, 14.0%

Answer:

Monthly payment is $104 for each assumption

Total interest cost

a. $3,276

b. $3,588

c. $3,900

d. $4,368

Step-by-step explanation:

Total balance left = $39,000-$7800 (20% of Cost of cottage)=$31,200

a) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 10.5% x $104 x 300 months = $3,276.

b) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 11.5% x $104 x 300 months = $3,588.

c) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 12.5% x $104 x 300 months = $3,900.

d) For monthly payment

$31,200/300 months (equivalent For 25 years) = $104

Total cost of Interest= monthly Interest% x monthly payment x 300 months= 14% x $104 x 300 months = $4,368.