Question

Suppose that you are considering a conventional, fixed-rate 15-year mortgage loan for $300,000. The lender quotes an APR of 4%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase. In the tenth year of your mortgage (months 109 through 120), what would be the total dollar amount of the interest paid?

Do not round at intermediate steps in your calculation

A) $9,619.05

B)$6,412.70

C)$5,284.99

D)$7,500.27

.

Answer 1

The interest amount paid between the 109th and 120th months is calculated using CUMIPMT function in Excel :

rate = 4%/12 (converting annual rate into monthly rate)

nper = 15*12 (15 year loan with 12 monthly payments each year)

pv = 300000 (loan amount)

start period = 109 (We are calculating principal paid off between 1st and 72nd month)

end period = 120 (We are calculating principal paid off between 1st and 72nd month)

type = 0 (each payment is made at the end of month)

CUMIPMT is calculated to be $5,284.99