Time to get a more up-to-date textbook.
10% mortgage?? anyway...
monthly rate = .10/12 = .008333... (store in your calculator)
n for 5 years = 60
n for 30 years = 360
monthly payment at original rate -- P
P(1 - 1.008333...)^-360)/.0083333 = 150000
P = 1316.36
amount if no payment would have been made
= 150000(1.008333..)^60 = 246796.34
amount of the first 60 payments
= 1316.36(1.008333..^60 - 1)/.008333
= 101934.86
outstanding balance after 5 years
= 246796.34 - 101934.86
= 144861.49
which is choice A
Given the recent drop in mortgage interest rates, you have decided to refinance your home. Exactly five years ago, you obtained a $150,000 30-year mortgage with a fixed rate of 10%. Today, you can get a 30-year loan for the currently outstanding loan balance at 7.5% interest. This loan, however, requires you to pay a $500 appraisal fee. What is the outstanding balance on the current loan today, if you just made the 60th payment?
A)$144,862
B)$105,159
C)$128,159
D)$130,938
I know that the answer is A but I have no idea how they arrived at that conclusion at all
1 answer
3 answers