Question

13. Choose the best answer

Suppose that you are planning to buy a house thats value in the market is of 200,000. He plans to make a down payment of 20,000 and to borrow 30 years at a rate and interest of 5%. Determine the monthly payment you should pay and the total interest you paid during those thirty years.

Possible Answers:

1.The payment would be $ 866.28 and the total interest paid would be $ 169,860.41

2.The payment would be $ 906.28 and the total disinterestedness paid would be $ 169,860.41

3.The payment would be $ 666.28 and the total interest paid would be $ 177,860.41

4.The payment would be $ 966.28 and the total interest paid would be $ 167,860.41

Answer 1

Information provided:

Cost of the house= $200,000

Down payment= $20,000

Mortgage= present value= $200,000 - $20,000= $180,000

Time= 30 years*12= 360 months

Monthly interest rate= 5%/12= 0.4167%

The monthly payment is calculated by entering the below in a financial calculator:

PV= -180,000

N= 360

I/Y= 0.4167

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 966.28

Therefore, the monthly payment is $966.28.

Total interest payment= $200,000 - ($966.28*360)

= $200,000 - $347,860.41

= $147,860.41.

Hence, the answer is option 4.

In case of any query, kindly comment on the solution.