document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1194571>Question 1194571</A>: <I><SPAN STYLE=\"word-break: break-all;\"> A family borrowed $72,000 to buy a house. The loan was at 6.1% and for 25 years. The monthly payments were $468.31 each. (See Example 6.)<BR>\n" );
document.write( "(a) How much of the first month's payment was interest, and how much was principal?<BR>\n" );
document.write( "interest   $<BR>\n" );
document.write( "principal  $<BR>\n" );
document.write( "(b) What was the total amount paid over the 25 years?\r<BR>\n" );
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document.write( "$ </SPAN>\n" );
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document.write( "Part (a)\r<BR>\n" );
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document.write( "The annual interest rate is 6.1%<BR>\n" );
document.write( "The monthly rate is (6.1%)/12 = 0.50833333333333% approximately. <BR>\n" );
document.write( "The 3's go on forever.\r<BR>\n" );
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document.write( "This percentage then converts to the decimal form 0.0050833333333333<BR>\n" );
document.write( "Either divide by 100, or simply move the decimal point over two spots to the left.\r<BR>\n" );
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document.write( "Multiply this approximate decimal value with the current balance.<BR>\n" );
document.write( "72,000*0.0050833333333333 = 366<BR>\n" );
document.write( "This result is the interest for the first month.\r<BR>\n" );
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document.write( "Yes the interest portion is quite high. It's common to have high interest payments at first. <BR>\n" );
document.write( "As time goes on, the interest steadily goes down as the principal goes up.<BR>\n" );
document.write( "The reason for this is because the balance will go down.\r<BR>\n" );
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document.write( "Subtract the interest from the monthly payment to compute the principal<BR>\n" );
document.write( "468.31 - 366 = 102.31\r<BR>\n" );
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document.write( "<font color=red>Answers:<BR>\n" );
document.write( "Interest = $366<BR>\n" );
document.write( "Principal = $102.31</font>\r<BR>\n" );
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document.write( "Part (b)\r<BR>\n" );
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document.write( "1 year = 12 months<BR>\n" );
document.write( "25*1 year = 25*12 months<BR>\n" );
document.write( "25 years = 300 months\r<BR>\n" );
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document.write( "If you did a monthly payment of $468.31 for 300 months, then you will have paid back a total of 468.31*300 = 140,493 dollars.\r<BR>\n" );
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document.write( "<font color=red>Answer: $140,493</font><BR>\n" );
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