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Question 11: Jerry and Elaine finally got married, and have bought a $325,000 house. The interest...

Question 11:

Jerry and Elaine finally got married, and have bought a $325,000 house. The interest rate is at 3.90%, paid monthly, and is a 30-year loan. They plan to borrow $300,000 for the purchase and put down $25,000.00. How much principal on the loan will they pay over the 30 years?

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Answer #1

The Formula for Loan is given by

Where,

  • P0 is the balance in the account at the beginning (the principal, or amount of the loan).
  • d is your loan payment (your monthly payment, annual payment, etc)
  • r is the annual interest rate in decimal form.
  • k is the number of compounding periods in one year.
  • N is the length of the loan, in years.

Given

P0= $300,000, d=?, r=3.9% =0.039 , k=12, N=30 years.

putting the above values in formula above

so the couple will pay $1415 monthly payment for 30 years or 360 month.

Therefore the couple have to pay a priciple of $1415 * 360 = $509,400 over 30 years. Answer.

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