Question

Consider a 30-year fixed-rate home loan of $575,500 with an interest rate of 5.25%. What is the total amount of interest paid? (Round your answer to the nearest cent.) $

Answer 1

first let us know the monthly payment:

A =P*(1+r)^n / [(1+r)^n-1]

here,

P=575,500

r=5.25% per annum =>5.25%*1/12 =>0.4375% =>0.004375.

n = 30 years*12

=>360.

monthly payment:

=>575,500*0.004375*(1.004375)^360 / [(1.004375)^360-1]

=>2517.8125*4.81417506 / [4.81417506-1]

=>$3,177.93

amount of interest paid = (monthly payment *number of months) - loan amount

=> ($3177.93*360) - 575,500

=>1,143,061.20-575,500

=>$568,554.80