Question

Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for $38,000. Assuming that she puts 25% down, what will be her monthly payment and the total cost of interest over the cost of the loan for each assumption? (Use the Table 15.1(a) and Table 15.1(b)). (Round intermediate calculations to 2 decimal places. Round your final answers to the nearest cent.)

e. What is the savings in interest cost between 11% and 14.5%? (Round intermediate calculations to 2 decimal places. Round your answer to the nearest dollar amount.)

f. If Harriet uses 30 years instead of 25 for both 11% and 14.5%, what is the difference in interest? (Use 360 days a year. Round intermediate calculations to 2 decimal places. Round your answer to the nearest dollar amount.)

Answer 1

Sol:

e).

Savings in interest cost between 11% and 14.5% = $106019 - $74402

Savings in interest cost between 11% and 14.5%  = $31,617.00

f).

If Harriet uses 30 years instead of 25 for both 11% and 14.5 %

Monthly Payment @ 11% = $371.39

Monthly Payment @ 14.5% = $481.06

Hence Total Interest Cost @ 11% = $371.39 * 360 – 40600 = $93,100.40

Hence Total Interest Cost @ 14.5% = $481.06 * 360 – 40600 = $132,581.60

Savings in interest cost between 11% and 14.5% = $132,581.60 - $93100.40

Savings in interest cost between 11% and 14.5%    = $39,481.20 or $39481