You want to take out a mortgage on a house worth $50,000 and pay it back in 10 years. Since your credit is very poor, the bank charges you simple interest at the rate of 2% per month. a. How much will you owe after 1 year? b. How much is the interest?

Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications
Section: Chapter Questions
Problem 11E
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You want to take out a mortgage on a house worth $50,000 and pay it back in 10 years. Since your credit is very poor, the bank charges you simple interest at the rate of 2% per month.

a. How much will you owe after 1 year?

b. How much is the interest?

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