Question

How much interest will you pay during the last six years of a 15-year $300,000 loan with an APR of 3.15% assuming you only make the minimum required monthly payments?

• A. $13,915

• B. $18,223

• C. $18,641

• D. $13,551

Answer 1

Step 1) Calculate monthly payment:

We are given the following information

Monthly Payment	PMT	To be calculated
Rate of interest	r	3.15%
Number of years	n	15.00
Monthly Compounded	frequency	12.00
Loan amount	PV	300000.00

We need to solve the following equation to arrive at the required PMT:

So the monthly payment is $2093.46

Step 2) Formulate the amortization schedule:

Opening balance = previous year's closing balance
Closing balance = Opening balance-Principal repayment
PMT is calculated as per the above formula
Interest = 0.0315 /12 x opening balance
Principal repayment = PMT - Interest

Step 3 )So the interest paid in last 6 years is the sum of the last 72 interest payments from 109th payment to the 180th payment. This comes to  $13,550.85 or  $13,551 rounded to the nearest dollar. So the correct option is D