Question

in the 1980s, an average mortgage range was around 18.75%. how much less per month would a $125,000 30 year mortgage be today if the current rate were 5%?

Answer 1

Answer:

The current per month mortgages are $1289.54 less than the earlier per month mortgages.

Step-by-step explanation:

The EMI formula is = $\frac{p\times r\times (1+r)^{n} }{(1+r)^{n}-1 }$

Here p = 125000

For case 1:

r = 18.75/12/100=0.015625

n = $30\times12=360$

So, putting values in formula we get :

$\frac{125000\times 0.015625\times (1+0.015625)^{360} }{(1+0.015625)^{360}-1 }$

= $1960.51

For case 2:

r = 5/12/100=0.004166

n = $30\times12=360$

So, putting values in formula we get :

$\frac{125000\times 0.004166\times (1+0.004166)^{360} }{(1+0.004166)^{360}-1 }$

= $670.97

Now we will find the difference between both EMI's

$1960.51-670.97=1289.54$ dollars.

Therefore, the current per month mortgages are $1289.54 less than the earlier per month mortgages.

Answer 2

Answer:

  $1289.48

Step-by-step explanation:

A financial calculator tells you the payment with the higher interest rate is $1960.51, and that with the lower interest rate is $671.03. The difference in payment amounts is ...

  $1960.51 -671.03 = $1289.48