Question

The Sandersons are planning to refinance their home. The outstanding principal on their original loan is $120,000 and was to amortized in 240 equal monthly installments at an interest rate of 10%/year compounded monthly. The new loan they expect to secure is to be amortized over the same period at an interest rate of 7%/year compounded monthly. How much less can they expect to pay over the life of the loan in interest payments by refinancing the loan at this time? (Round your answer to the nearest cent.)
$

Answer 1

find the monthly payment when the interest rate is 10%

r=10%=0.1

n=12 for monthly payment

t=240 payment

L=120000

.

the total amount paid is given by

.

.

find the monthly payment when the interest rate is 7%

r=7%=0.07

n=12 for monthly payment

t=240 payment

L=120000

.

the total amount paid is given by

.

.

saved interest is given by