Question

Suppose a $280,000 mortgage is to be amortized at 5.5% interest. Find the total amount of interest that would be paid for each term.

a. 15 years

b. 30 years

Answer 1

Amount / year

(a) n = 15 Years, P = 280000 and r = 5.5%

A = 27895.16

Therefore Total Amount Payable in 15 years = 27895.16 * 15 = 418427.5

Interest Payable = 418427.5 - 280000 = $138427.5

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(b) n = 20 Years, P = 280000 and r = 5.5%

A = 19265.5

Therefore Total Amount Payable in 30 years = 23430.21 * 30 = 577965.3

Interest Payable = 577965.3 - 280000 = $297965.3

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