Question

A 30 year home loan of $135000 at 8.75% compounded monthly is obtained. a. Find the montly payments rounded up to the next cent. $ b. State the total amount of interest paid on the loan assuming that it is kept for 30 years and all payments are the same. $

Answer 1

a)

We are given,

No of yrs = 30Interest rate per annum = 8.75%

No of compoundings per yr = 12

No of periods = 30 * 12 = 360

Interest rate per period = 8.75% / 12 = 0.73%

Loan amount = $135,000

Equal monthly payment = [P×r×(1+r)^n]÷[(1+r)^n-1]

= (135000*(1+0.73%)^360)/((1+0.73%)^360-1)

= $1,062.05

Hence monthly payment is $1,062.05.

b)

Total interest paid = 360 * Monthly payment - Loan amount (135,000)

= 360 * 1,062.05 - 135,000

= 382,336.40 - 135,000

= $247,336.40

Hence Total Interest paid = $247,336.40.

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answered by: anonymous