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A couple who borrow $60,000 for 25 years at 8
A couple who borrow $60,000 for 25 years at 8.4%, compounded monthly, must make monthly payments of $479.10. (a) Find their unpaid balance after 1 year. (Round your answers to the nearest cent.) 59262.90 (b) During that first year, how much do they pay towards the principle? (Round your answer to the nearest cent.) $ During that first year, what are their total payments? (Round your answer to the nearest cent.) $ 5749.20 During that first year, how much interest do they pay? (Round your answer to the nearest cent.) $ 5012 10
Expert Solution
a) No of payments remaining after 1 year=24*12= 288
Balance loan= PV of annuity= A*(1-1/(1+r)^n)/r
= 479.10*(1-1/(1+8.4%/12)^288)/(8.4%/12)
=479.10*123.6963074
=59262.90
b) Amount paid towards principal= Total loan-Loan balance
=60000-59262.90
=737.10
Total payments= Monthly payment*No of payments
= 479.10*12
= 5749.20
Interest paid= Total payments-Principal repaid
= 5749.20-737.10
= 5012.10
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