Question

The following loan is a simple interest amortized loan with monthly payments. (Round your answer to the nearest cent.)

$170,000, 9 1/2%, 35 years

(a) Find the monthly payment.
$  

(b) Find the total interest.
$

Answer 1

Monthly Loan Payment

Loan Amount (P) = $170,000

Monthly Interest Rate (n) = 0.791667% per month [9.50% / 12 Months]

Number of months (n) = 420 Months [35 Years x 12 Months]

Therefore, the Monthly Loan Payment = [P x {r (1+r)ⁿ} ] / [( 1+r)ⁿ – 1]

= [$170,000 x {0.00791667 x (1 + 0.00791667)⁴²⁰}] / [(1 + 0.00791667)⁴²⁰ – 1]

= [$170,000 x {0.00791667 x 27.437415}] / [27.437415 – 1]

= [$170,000 x 0.217213] / 26.437415

= $1,396.74 per month

“Monthly Loan Payment will be $1,396.74 per month“

Total Interest for the Loan

Total Interest for the Loan = Total Payment – Loan Amount

= [$1,396.74 per month x 420 Months] - $170,000

= $586,630.80 - $170,000

= $416,630.80