Question

Brigitte is buying a house priced at $43100. Loan A calls for her to make equal quarterl y payments for 6 years at a interested rate of 2.14% with her first payment due in 1 quarter. However, her loan officer has offered a nes opp involving euqal quarterly payments for 7 years at a quarterly rate of 1.97% with her first payment due later today. How mch would stwiching from lan A to the new opp reduce the amount?

Answer 1

EQI:

EQI = Loan / PVAF (r%, n)
PVAF = SUm [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

OPtion A:

= $43100 / PVAF(0.535%, 24 )

= $ 43100 / 22.4668

= $ 1918.39

Total Amount paid :

= EQI * Instalements

= 1918.39* 24

= 46041.25

OPtion B:

= $43100 / [ 1 + PVAF(0.4925%, 27 ) ]

= $ 43100 / [ 1 + 25.2238 ]

= $ 43100 / 26.2238

= $ 1643.55

Total Amount paid :

= EQI * Instalements

= 1643.55 * 28

= 46019.26

AMount that can be saved = 46041.25 - 46019.26

= $ 21.99

Pls do rate, if the answer is correct and comment, if any further assistance is required.