Question

You need a loan of

​$140,000

to buy a home. Calculate your monthly payments and total closing costs for each choice below. Briefly discuss how you would decide between the two choices.Choice​ 1:

20​-year

fixed rate at

7​%

with closing costs of

​$2300

and no points.Choice​ 2:

20​-year

fixed rate at

6.5​%

with closing costs of

​$2300

and

5

points.

What is the monthly payment for choice​ 1?

​$nothing

​(Do not round until the final answer. Then round to the nearest cent as​ needed.)

Answer 1

Choice 1:

Amount =$ 140,000

Annual Interest = 7%

Monthly Interest = 7/12% = 0.583%

ime period = 20*12 = 240 months

Closing cost = $2300

So, P = 0.00583*140000/(1-1.00583^-240) = $ 1085.08

And last payment would be of 1085.08+2300 = $3385.08