Question

Include the values you enter on the TVM Solver with your solutions. 1. Mr. Wong takes out a $180 000 mortgage to purchase a new house. The interest rate is 6.4% /a, compounded semi-annually. He makes monthly payments of $1200.00.

a) How long will it take to pay off the mortgage? N= I%= PV= PMT= FV= P/Y= C/Y=

b) How much interest is paid over the life of the mortgage?

Answer 1

Enter the stroke in the financial calculator-
A)
PV = -180000
I/Y = 0.526
PMT = 1200
CPT - N = 296.58
it will take around 24.71 years
Calculation of interest rate -
interest rate compounded semiannually 6.4%
semi annual rate 6.4 / 2 =3.2%
Interest = {(+rate)^period - 1 } *100
i = {( 1 + 0.032)^(1/6) - 1}*100
i = 0.526 approx (rounded off)

B)
Total interest paid = Total amount - Purchase Price
Total Interest paid = (1200*296.58) - 180000
Total Interest paid = 178596 approx
Note - Calculations is rounded off actual answer may be slightly diferent, but the procedure is right.

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