Question

Some banks now have biweekly mortgages (that is, with payments every other week). Compare a 20-year, $120,000 loan at 9.3% by finding the payment size and the total interest paid over the life of the loan under each of the following conditions. (Round your answers to the nearest cent.)

(a) Payments are monthly, and the rate is 9.3%, compounded monthly.

Payment size $_______________

total interest $______________

(b) Payments are biweekly, and the rate is 9.3%, compounded biweekly. (Assume a standard 52-week year.)

Payment size $_______________

total interest $______________

Answer 1

(a)	Payment Size	765,341	$
	Interest	645,341	$
(b)	Payment Size	768,294	$
	Interest	648,294	$
	Effective rate of interest = (1+r/n)^n-1
	Compounded	r	n	e
	Per Month	9.3%	12	9.7068%
	Per Biweekly	9.3%	26	9.7280%
	Amount/Payment Size = Principal*(1+e/100)^n
	Interest = Payment Size - Principal
	Compounded	Principal	e	n	Payment Size	Interest
	Per Month	120,000	9.7068%	20	765,341	645,341
	Per Biweekly	120,000	9.7280%	20	768,294	648,294