Question

Obtain the total interest paid during the last ten years of a $ 503215 mortgage when n = 20 and k = 0.074, assuming monthly compounding (end of month payments).

Round your final answer to 2 decimal places.

Answer 1

Mortgage Amount = $503,215

Time Period = 20 years = 240 months

Interest Rate = 7.40%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 503215, FV = 0, T = 240, I = 0.074/12]

PMT = $4,023.15

Monthly Payment = $4,023.15

Now Calculating Amount of Principal left in the last 10 years,

Using TVM Calculation,

FV = [PV = 503,215, T = 120, PMT = -4023.15, I = 0.074/12]

FV = $340,424.62

So,

Principal paid in last 10 years = $340,424.62

So,

Interest Paid in last 10 years = 4023.15*120 - 340,424.62

Interest Paid in last 10 years = $142,353.38