Question

If Clare takes out a mortgage for 22 years at an interest rate of 3% and her monthly repayments are $984, what is the principal loan amount?

Answer 1

Using simple interest, it is found that the principal loan amount was of $156,491.6.

The amount of money after t years in simple interest is modeled by:

$A(t) = A(0)(1 + rt)$

In which:

• A(0) is the initial amount, which is also called principal.
• r is the interest rate, as a decimal.

In this problem, she paid $984 monthly for 22 years, hence:

$t = 22, A(t) = 984(22)(12) = 259776$

Interest rate of 3%, hence $r = 0.03$

Then:

$A(t) = A(0)(1 + rt)$

$259776 = A(0)[1 + 0.03(22)]$

$A(0) = \frac{259776}{1 + 0.03(22)}$

$A(0) = 156491.6$

The principal loan amount was of $156,491.6.

A similar problem is given at brainly.com/question/13176347