Answer:
a. $3155.19
b. $1,135,868.40
c. $705,868.40
d. interest
Step-by-step explanation:
You want to find the monthly payment, total repaid, and finance charge on a 30-year mortgage for $430,000 at the rate of 8%.
a. Payment
You can use a spreadsheet, financial calculator, app, or the amortization formula to find the payment amount.
A = P(r/12)/(1 -(1 +r/12)^(-12t))
where P is the principal amount of the loan, r is the annual interest rate, and t is the number of years.
A = 430,000(0.08/12)/(1 -(1 +0.08/12)^(-12·30)) ≈ 3155.19
The monthly payment is $3,155.19.
b. Total repaid
The total of the 12·30 = 360 payments is ...
360 · $3155.19 = $1,135,868.40
It will take about $1,135,868.40 to pay off the loan.
c. Finance charge
The finance charge is the difference between the amount repaid and the original loan amount:
$1135868.40 -430000 = $705,868.40
The finance charge is $705,868.40.
d. Comparison
The finance charge at $706k is considerably greater than the original cost of the home, $430k.
The finance charge is greater.
