math URGENT HELP
posted by Blaire .
Mr. Hobbs was just about to take out a home mortage of $120,000 for 20 yrs at the rate of 10.0% compounded monthly. The monthly payments would have been $1158.03. But a competitive bank offered him a 30 yr mortgage at 9,5% which has monthly payments of $1009.03. Mr Gibbs went with the second bank because he assumed that a lower monthly payment and a lower interest rate would be a better bargain. Assuming that he could afford the higher payment; do you think he did the right thing? Explain your answer
check on payments for each
120000 = pay[1 + 1.00833333^-240]/.0083333
payment = 1158.03
2) 120000 = pay [ 1+ 1.00791666^-360 ]/.00791666
payment = 1009.02
Since the second had a lower interest rates, it should be his choice.
The advantage will be with the lower rate.