Asked 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
Answers
Answered by
Reiny
check on payments for each
1)
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.
1)
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.
There are no AI answers yet. The ability to request AI answers is coming soon!