<h3>Answer: Likely it's choice D) </h3>
See below for the explanation why
========================================================
down payment = 22% of home value
down payment = 22% of $426,000
down payment = 0.22*426,000
down payment = 93,720 dollars
The remaining amount mortgaged (i.e. loaned out) is
home value - (down payment) = 426,000 - 93,720 = 332,280
----------------
The monthly payment formula is
P = (L*i)/(1 - (1+i)^(-n))
where,
- P = monthly payment
- L = amount loaned
- i = monthly interest rate in decimal form
- n = number of months
In this case,
- L = 332,280 dollars
- i = 0.0525/12 = 0.004375 which is exact without any rounding
- n = 20*12 = 240 months (equivalent to 20 years)
Plugging those three values into the formula mentioned gets us the following:
P = (L*i)/(1 - (1+i)^(-n))
P = (332,280*0.004375)/(1 - (1+0.004375)^(-240))
P = 2,239.0493959316
P = 2,239.05
Multiply this monthly payment by the 240 months mentioned.
2,239.05*240 = 537,372
This is the total amount paid back (principal + interest)
Add on the down payment to find out how much money total is handed over: 537,372 + 93,720 = 631,092
Unfortunately $631,092 is not listed as one of the answer choices. The closest would be D) $631,057
I'm not sure if I made a rounding error somewhere, or perhaps your teacher is using an amortization table. It's also possible your teacher made a typo somewhere. I'd ask them for clarification.
