Question

A restaurant manager has the option of a 30-year loan of $417,000 at an annual interest rate of 3.85% or the same interest rate but on a loan for 15 years.
(a)
Calculate the monthly payment for each loan. (Round your answers to the nearest cent.)
30-year $
15-year $
(b)
Calculate the savings in interest by using the 15-year loan. (Round your answer to the nearest cent.)
$
(c)
The term of the 15-year loan is one-half the term of the 30-year loan. Is the monthly payment for the 15-year loan twice that of the 30-year loan?
Yes
No
(d)
Is the interest savings for the 15-year loan more or less than one-half of the interest paid on the 30-year loan?
more
less

Answer 1

a) The monthly payment for each loan is as follows:

30-year $1,954.93

15-year $3,053.25

b) The savings in interest by using the 15-year loan is $154,189,20 ($286,774.20 - $132,585).

c) No. the monthly payment for the 15-year loan is not twice that of the 30-year loan as the loan term.

d) The interest savings for the 15-year loan are more than one-half of the interest paid on the 30-year loan.

How are the calculations for periodic payments done?

The calculations for the monthly payments, including interests can be carried out using an online finance calculator, as follows:

30-year Loan:

N (# of periods) = 360 months (12 x 30 years)

I/Y (Interest per year) = 3.85%

PV (Present Value) = $417000

FV (Future Value) = $0

Results:

PMT = $1,954.93

Sum of all periodic payments = $703,774.80 ($1,954.93 x 360)

Total Interest = $286,774.20 ($703,774.80 - $417,000)

15-year Loan:

N (# of periods) = 180 months (12 x 15 years)

I/Y (Interest per year) = 3.85%

PV (Present Value) = $417000

FV (Future Value) = $0

Results:

PMT = $3,053.25

Sum of all periodic payments = $549,585 ($3,053.25 x 180)

Total Interest = $132,585 ($549,585 - $417,000)

Learn more about periodic payments at brainly.com/question/13098072

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