Question

Compute the interest paid on a 30-year mortgage for $370338 if the annual interest rate is 4.8%. Round answer to the nearest dollar.

Answer 1

According to given information the loan amount   is $370338

Rate of interest r = 4.8% = 4.8/100 = 0.048

Compounding frequency is monthly so r = 0.048/12 = 0.004

Now number of payments t = 30 x 12 = 360

Now we can use the below formula to find the payment (PMT)

PMT = [ p x r x (1+r)^t ] / [(1+r)^t-1]

PMT = [370338 x 0.004 x (1+0.004)³⁶⁰ ] / [(1+0.004)³⁶⁰-1]

PMT = [1481.352 x 4.20858] / [4.20858 - 1]

PMT = [6234.3884] / [3.20858]

PMT = $1943.0366 ~ $1943

So the monthly payment = $1943

So total payment amount = 1943 x360 = $699480

Total interest payment = 699480 – 370338 = $329142

So total interest amount = $329142