The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $100,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 2.5%/year compounded monthly, payable over a 30-year period in 360 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 2.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments. (a) Find the monthly payment required to amortize each of these loans over the life of the loan. Option A Option B (b) How much interest would the Martinezes save if they chose the 12-year mortgage instead of the 30-year mortgage?
The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $100,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 2.5%/year compounded monthly, payable over a 30-year period in 360 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 2.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments. (a) Find the monthly payment required to amortize each of these loans over the life of the loan. Option A Option B (b) How much interest would the Martinezes save if they chose the 12-year mortgage instead of the 30-year mortgage?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 19P
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The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $100,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.)
Option A: A fixed-rate mortgage at an interest rate of 2.5%/year compounded monthly, payable over a 30-year period in 360 equal monthly installments.
Option B: A fixed-rate mortgage at an interest rate of 2.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments.
Option B: A fixed-rate mortgage at an interest rate of 2.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments.
(a) Find the monthly payment required to amortize each of these loans over the life of the loan.
Option A
Option B
(b) How much interest would the Martinezes save if they chose the 12-year mortgage instead of the 30-year mortgage?
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