Question

1.​Maria and John have been married for 2 years and just learned that they are pregnant.

They have been renting a small apartment but decide to purchase a house. The one they have found has a selling price of $300,000. They will make a 20% down payment.

They are considering 2 financing options at their credit union:

Option 1: ​ 3.125% interest 30-year mortgage:   

Option 2: ​2.5% interest 15-year mortgage:

Answer the following questions showing all your work to reach each answer.

A. ​Which option will result in a lower monthly payment if they take the full term of the mortgage? What will that monthly payment be?

B. ​Which option will result in the most total interestif they take the full term of the mortgage? What will that total interest be?

2.​Maria and John decide to shop for furnishings for the new house. They choose items that amount to $5600.00. The store has 2 fixed installment simple interest loan optionsfor purchasing:

Option 1: 20% down payment and financing at 5% simple interest per year for 3 years.

Option 2: no down payment and financing at 5.25% simple interest for 4 years.

Answer each of the following questions separately, showing all your work to reach each answer.

A. Which option will result in smaller finance charge(interest)? What will that finance charge/interest be?

B. Which option will result in the smaller monthly payment on this fixed installment loan? What will that monthly payment be?  

C. They decide to defer any purchases and invest a $5600 bonus that Maria will be getting from work in a savings account.  The interest rate is 1.8% compounded every month. How much interest will they earn in 4 years?

D. They decide to defer any purchases and loan the $5600bonus to a needy relative at 1.5% simple interest per year.  How long will the term of the loan need to be if they want to earn $500 in interest (assuming the loan is not paid off early).

Answer 1

Solution for Question 1 :

All the answers, along with calculations and formula are provided in the following attached image files :

NOTE : As per our guidelines, in case of multiple questions without specification as to which questions needs to be solved, the first question is answered.