Question

# Tom Burke bought a home in Virginia for \$214,000. He put down 20% and obtained a...

Tom Burke bought a home in Virginia for \$214,000. He put down 20% and obtained a mortgage for 25 years at 9%. What is Tom’s monthly payment and the total interest cost of the loan

 Down payment is = (214000*20%) Down payment is = \$ 42,800/. Balance of home purchase cost to be in Monthly installments is \$ 171,200/. Monthly payment can be found using Present value of annuity formula Present value of annuity is = P*(1-(1+r)^-n)/r "P" is Monthly Payment = ? "r" is Monthly interest rate = 9%/12 = 0.75% "n" is No of months = 25*12 = 300 Present value of annuity is = \$ 171,200 171200=P*(1-(1+0.0075)^-300)/0.0075 171200=P*119.1616 P is = (171200/119.1616) P is = \$ 1,436.70/. Approx. Tom's Monthly payment is \$ 1,436.70/. Total interest on the loan is = Total of monthly payments - Loan amount balance after down payment Total interest on the loan is = ((1436.70*300)-171200) Total interest cost on the loan is = \$ 259,810/.

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