a. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan? b. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded continuously? How much interest is paid over the life of the loan? c. What will be the monthly payment on a 15-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan?

Question
Asked Sep 16, 2019
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a. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan?
 
b. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded continuously? How much interest is paid over the life of the loan?
 
c. What will be the monthly payment on a 15-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan?
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Expert Answer

Step 1

Calculation of Monthly Payment and Interest Paid on the Loan:

Excel Spreadsheet:

A
B
1
PART A
2 Mortgage Amount
3 Interest Rate
$250,000
0.50%
4 Number of Periods
360
Мonthly Payшent
Interest Paid on Loan S289,595.47
5
S1,498.88
6
7
8
PART B
9 Mortgage Amount
10 Interest Rate
$250,000
0.5013%
11 Number of Periods
360
Monthly Payment
13 Interest Paid on Loan S290,465.17
12
S1,501.29
14
PART C
15
16 Mortgage Amount
$250,000
17 Interest Rate
0.50%
18 Number of Periods
Monthly Payment
20 Interest Paid on Loan $129,735.57
180
19
S2,109.64
A1
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A B 1 PART A 2 Mortgage Amount 3 Interest Rate $250,000 0.50% 4 Number of Periods 360 Мonthly Payшent Interest Paid on Loan S289,595.47 5 S1,498.88 6 7 8 PART B 9 Mortgage Amount 10 Interest Rate $250,000 0.5013% 11 Number of Periods 360 Monthly Payment 13 Interest Paid on Loan S290,465.17 12 S1,501.29 14 PART C 15 16 Mortgage Amount $250,000 17 Interest Rate 0.50% 18 Number of Periods Monthly Payment 20 Interest Paid on Loan $129,735.57 180 19 S2,109.64 A1

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Step 2

Excel Workings:

...
A
PART A
1
2 Mortgage Amount
3 Interest Rate
4 Number of Periods
Monthly Payment PMT(B3,B4,-B2,0)
6 Interest Paid on Loan (B5*B4)-B2
250000
-6%/12
- 30*12
5
7
PART B
9 Mortgage Amount
10 Interest Rate
11 Number of Periods
Monthly Payment PMT(B10,B11,-B9,0)
13 Interest Paid on Loan |=(B12*B11)-B9
250000
-EXP(6 % / 12 )-1
- 30*12
12
14
15
PART C
16 Mortgage Amount
250000
- 6%/12
15*12
Monthly Payment|-PMT(B17,B18,-B16,0)
17 Interest Rate
18 Number of Periods
19
20 Interest Paid on Loan (B19*B18)-B16
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A PART A 1 2 Mortgage Amount 3 Interest Rate 4 Number of Periods Monthly Payment PMT(B3,B4,-B2,0) 6 Interest Paid on Loan (B5*B4)-B2 250000 -6%/12 - 30*12 5 7 PART B 9 Mortgage Amount 10 Interest Rate 11 Number of Periods Monthly Payment PMT(B10,B11,-B9,0) 13 Interest Paid on Loan |=(B12*B11)-B9 250000 -EXP(6 % / 12 )-1 - 30*12 12 14 15 PART C 16 Mortgage Amount 250000 - 6%/12 15*12 Monthly Payment|-PMT(B17,B18,-B16,0) 17 Interest Rate 18 Number of Periods 19 20 Interest Paid on Loan (B19*B18)-B16

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