Question

The problem describes a debt to be amortized. (Round your answers to the nearest cent.) A man buys a house for $340,000. He makes a $150,000 down payment and amortizes the rest of the purchase price with semiannual payments over the next 5 years. The interest rate on the debt is 10%, compounded semiannually. (a) Find the size of each payment. $ (b) Find the total amount paid for the purchase. $ (c) Find the total interest paid over the life of the loan. $

Answer 1

Loan amount = 340,000 - 150,000 = $190,000

PV = $190,000

Number of semi-annual payments, n = 5 * 2 = 10

r = 10%/2 = 0.05

(a) The size of each payment is $24,605.87

(b) Total amount paid = PMT * n

Total amount paid = 24,605.8692408391 * 10

Total amount paid = $246,058.69

(c) Total interest paid = Total amount paid - PV

Total interest paid = 246,058.69 - 190,000

Total interest paid = $56,058.69