Question

E231- John Smith wants to buy a house that worth $250,000. He put done $40,000 down payment and borrow the rest from a bank with interest rate 3.5% per year compounded monthly for 15 years. What is the monthly payment to the bank? How much interest John will pay to the bank in 15 years? How much interest John will pay in the FIRST year?

Answer 1

Price of house = $ 250,000

Down payment. = $ 40,000

Loan amount = $ 250,000 - 40,000 = $ 210,000

Interest rate = 3.5% compounded monthly

Tenure = 15 years = 15 × 12 = 180 months

We can calculate the mllonthly payment ($ A) as follows

Monthly payment =.$ 1,501.25

Total payment made in 180 months = $ 1501.25 ×180

Total payment = $ 270,225.60

Loan amount = $ 210,000

Total interest paid = $ 270,225.60 - 210,000 = $ 60,225.60

We are required to determine the interest paid in first year that is in first 12 payments.

First of all calculate the amount to be paid after the 12th payment. Number of months remaining = 180 - 12 = 168

Present worth at the end of 12th month

= 1501.25(P/A,3.5/12%,168)

Thus, the amount of principal paid in first 12 months

= 210,000 - 199,162.20 = $ 10,837.80

Total payment in 12 months =.1501.25 × 12 = $ 18,015

As we know total.payment is

Total payment = Principal + Interest

18,015 =.10,836.80 + pinterest paid

Solved it using excel too got the same.value refer the attached picture.

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.