Question

Five years ago, Diane secured a bank loan of $310,000 to help finance the purchase of a loft in the San Francisco Bay area. The term of the mortgage was 25 yr, and the interest rate was 6%/year compounded monthly on the unpaid balance. Because the interest rate for a conventional 25-yr home mortgage has now dropped to 4%/year compounded monthly, Diane is thinking of refinancing her property. How much less would Diane's monthly mortgage payment be if she refinances? Please round the answer to the nearest cent. $525.78 $524.73 $542.20 $503.91 O $519.80

Answer 1

0.005 T2 100X12 Now, 300 Answer- Monthly instalment = Pxvx (1+0) [(1+r)n-1 where, Principal amount, P = $ 310,000 Monthly interest code = 6% - Number of monthe, n=85y". = 85X12 = 3oo martie Substitutes Value wh egun = 310,000 X 0.005 X (1+0.005) [ (1+0.005) 300_1 = 310000 X 0.005 (1.005)300 (1.005/300 - ) 3 loooox0.005 X 4.4649 4.4649-1 = 31000oX0.005X4.4649 3.4649 = 1997.34 Diane's Cutscend moutily mostage paymeed - $1997.84 Diane's Current pernicipal . How 1994.34= fx 0.005 X (1-005 present. (Syear [ (1.005)940 n=20x12=240 1997:34 = PX 0:0165 2.3109 P = 279651.81 you will need 240 to cubok out the back). So,

DBure's new wepaymerele will be of hesy interest deaf to 4 % and ies siemaining P=24965).81 4 x 100 20 year 0.003 n = 80x12=240 mouls. substitute Values in ear 240 279651.8) X 0.003x(1,003) [(1.003)-1 1721.72 - 1636.30 1.0522 Menthly mortgage payment = $ 1636:30 So her paymes dropped from $1991:34 to $ 1636 30 = 1997.34-1636.30 -$361.04