Question

24. Lynn bought a $300,000 house, paying 10% down, and financing the rest at 6%

Answer 1

Answer:

a. Her monthly payment is $1618.786418

b. She will pay $312763.1105 interest over the life of the loan

Step-by-step explanation:

Let us revise the rules of the monthly payments and interest

$M.P=\frac{P(\frac{r}{n})}{1-(1+\frac{r}{n})^{-nt}}$

$I = M.P(nt)- P$

Where:

• M.P is the monthly payment

• P is the initial value

• r is the interest rate in decimal

• n is the period

• t is the time

∵ Lynn bought a $300,000 house

∵ She was paying 10% down

→ That means the initial amount is 90% of $300,000

∴ p = 90/100 × 300,000 = 270,000

∵ She was financing the rest at 6%

∴ r = 6% = 6/100 = 0.06

∵ There is a monthly payment

∴ n = 12

∵ She was financing the rest for 30 years

∴ t = 30

a.

→ Substitute these values in the first rule to finding the monthly payment

∵ $M.P=\frac{270,000(\frac{0.06}{12})}{1-(1+\frac{0.06}{12})^{-12(30)}}$  

→ Let us use the calculator to find the answer

∴ M.P = $1618.786418

∴  Her monthly payment is $1618.786418

b.

→ Substitute these values in the first rule to finding the second rule

   to find the interest

∵ $I = (1618.786418)(12)(30)-270,000$

→ Let us use the calculator to find the answer

∴ I = $312763.1105

∴ She will pay $312763.1105 interest over the life of the loan