Question

A couple who borrow $80,000 for 30 years at 6%, compounded monthly, must make monthly payments of $479.64. (Round your answers to the nearest cent.) (a) Find their unpaid balance after 1 year. (b) During that first year, how much interest do they pay?

Answer 1

To find their unpaid balance after one year we use the remaining balance formula.

B = 79017.52

To find how much interest was paid for the first year subtract the remaining balance from the amount of the loan

Interest = 12 * 479.64 - (80000 - 79017.52)

             = 5755.68 - 982.48 = 4773.2

This is interest in one year.

Hope this will help you.