Question

You want to buy a house that costs $194,000. You plan on making downpayment of 10%. You found a loan with a 5.9% annual rate compounded monthly for 20 years. How much interest is paid over the life of the loan.

Round your answer to two decimal places. Do not include the $ sign in your answer.

Answer 1

House cost	194,000.00
Down payment	10%
Down payment	194000*10%
Down payment	19,400.00
Cost financed	174,600.00
PV of annuity for making pthly payment
P = PMT x (((1-(1 + r) ^- n)) / i)
Where:
P = the present value of an annuity stream	174,600.00
PMT = the dollar amount of each annuity payment	To be computed
r = the effective interest rate (also known as the discount rate)	6.06%	((1+5.9%/12)^12)-1)
i=nominal Interest rate	5.90%
n = the number of periods in which payments will be made	20
174600	= PMT x (((1-(1 + r) ^- n)) / i)
174600	= Annual payment* (((1-(1 + 6.06%) ^- 20)) / 5.90%)
Annual payment=	174600/(((1-(1 + 6.06%) ^- 20)) / 5.90%)
Annual payment=	14,890.04
Total payment over 20 years=	14890.04*20
Total payment over 20 years=	297,800.83
Total principal payment	(174,600.00)
Total interest payment over 20 year period=	123,200.83