Loretta Scholten bought a home for $210,000 with a down payment of $30,000. Her rate of...

Loretta Scholten bought a home for $210,000 with a down payment of $30,000. Her rate of interest is 6% for 35 years. Calculate the total cost of interest for Loretta Scholten. (Round your answer to the nearest cent.)

Total cost of interest

Expert Solution

Total cost of interest		$ 2,51,063.42

Working:

Loan amount	=	Cost of house	-	Down payment
	=	$ 2,10,000.00	-	$ 30,000.00
	=	$ 1,80,000.00


Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
	=	(1-(1+0.005)^-420)/0.005		i	=	6%/12	=	0.005
	=	175.3802262		n	=	35*12	=	420

Monthly payment	=	Loan amount	/	Present value of annuity of 1
	=	$ 1,80,000.00	/	175.3802262
	=	$ 1,026.34

Total repayment	=	Monthly payment	*	Number of months
	=	$ 1,026.34	*	420
	=	$ 4,31,063.42

Finance charge	=	Total repayment	-	Loan amount
	=	$ 4,31,063.42	-	$ 1,80,000.00
	=	$ 2,51,063.42

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