Question

Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for $55,000. Assuming that she puts 20% down, what will be her monthly payment and the total cost of interest over the cost of the loan for each assumption? (Do not round intermediate calculations. Round your answers to the nearest cent.) Monthly payment Total cost of interest a. 25 Years, 7.5% $ $ b. 25 Years, 7% $ $ c. 25 Years, 6.5% $ $ d. 25 Years, 6% $ $ e. What is the savings in interest cost between 6.00% and 7.5%? (Round your answer to the nearest dollar amount.) Interest cost $ f. If Harriet uses 30 years instead of 25 for both 7.5% and 6.00%, what is the difference in interest? (Use 360 days a year.Round your answer to the nearest dollar amount.) Interest difference $

Answer 1

Hello Sir/ Mam

Payment Amount(P) can be easily calculated using the formula:

where Present Value = $55,000*80% = $44,000

Interest Amount can be calculated using:

Using the above formulas,

	Cost	$55,000.00
	Down-Payment %age	20%
	Down-Payment	$11,000.00
	Remaining	$44,000.00
	Term(in years)	Interest Rate		Monthly Payment	Total Interest Cost
a)	25	7.50%		$325.16	$53,546.84
b)	25	7%		$310.98	$49,294.85
c)	25	6.50%		$297.09	$45,127.35
d)	25	6%		$283.49	$41,047.78

(e)

(f) If 30 years is used instead of 25 years :

Term(in years)	Interest Rate		Monthly Payment	Total Interest Cost
30	7.50%		$307.65	$66,755.58
30	6%		$263.80	$50,968.80

I hope this solves your doubt.

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