Question

Obtain the total interest paid during the last ten years of a $ 502045 mortgage when n = 20 and k = 0.075, assuming monthly compounding (end of month payments).

Round your final answer to 2 decimal places.

Answer 1

Loan Amount = $502,045

Time Period = 20 years

Interest Rate = 7.5%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 502045, FV = 0, T = 240, I = 0.075/12]

Monthly Payment = $4,044.44

At the end of Year 10,

Calculating Balance Loan Amount,

FV = [PV = 502045, T = 120, PMT = 4044.44, I = 0.075/12]

FV = 340722.9

So,

Principal Paid in last 10 years = $340,722.90

Total Amount Paid In 10 years = 4044.44*120 = 485,332.8

So,

Total Interest paid in last 10 years = 485,332.80 - 340,722.90

Total Interest paid in last 10 years = $144,609.90