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24) Your business finance teacher asks you to compare a 15-year fixed rate at 5.75 percent to a 30-year fixed rate at 6.25 pe
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Answer 24
PMT= Monthly payments PV*i
1-(1+i)^-n
IF rate 5.75%
PMT= Monthly payment= ?
PV= Loan amount= $ 185,400.
n= no. of payments= 15*12=180
i 5.75%/12= 0.00479166666666667
PMT 185400*0.00479166666666667
1-(1+0.00479166666666667)^-180
PMT 888.375
1-(1.00479166666666667)^-180
PMT 888.375
1-0.422975859570811
PMT 888.375
0.57702414
Monthly payments           1,539.58
IF rate 6.25%
PMT= Monthly payment= ?
PV= Loan amount= $ 185,400.
n= no. of payments= 30*12=360
i 6.25%/12= 0.00520833333333333
PMT 185400*0.00520833333333333
1-(1+0.00520833333333333)^-360
PMT 965.625
1-(1.00520833333333333)^-360
PMT 965.625
1-0.15410299895385
PMT 965.625
0.845897
Monthly payments 1,141.54
Option C is closest to my calculation.
So answer is option C, 6.25% fixed rate for 30 years, with payments of $ 1,142.06.
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