Suppose a 60,000 martgage is to be amortized at 7.5% interest. Find the total amount of interest that would be paid for each term a) 10 years b) 30 years
I will do a) you can do b) the same way
You don't say, but I will assume there are equal monthly payments
a) i = .075/12 = .00625
n = 12(10) = 120
60,000 = P (1 - 1.00625^-120)/.00625
60000 = P(84.244742...)
P = 712.21
interest paid for the 10-year mortgage
= 712.21(120) - 60000
= 25,465.27
do b) the same way,
hint: there is only one number you have to change.
BTW, I don't like to do the calculation at the end for the interest, since it is not really valid.
We are just doing straight multiplication over a 10 year span without considering that time = money
e.g. The payment of $712.21 made in month 18 is not really the same as the payment of $712.21 made in month 65.