SOLUTION: LaMar and Louise Hubbs moved from Alabama to the heart of Texas. They were delighted to find a Southern-style house for sale and proceeded with plans to buy it. They needed to borr
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Question 1131820: LaMar and Louise Hubbs moved from Alabama to the heart of Texas. They were delighted to find a Southern-style house for sale and proceeded with plans to buy it. They needed to borrow $140,000 and decided to obtain a 20-year loan at a 9.5% interest rate. However, the monthly payments were higher than they could afford, so they decided on a 30-year loan to obtain lower monthly payments. (Round your final answers to two decimal places.)
(a) Find the monthly payments for the 20-year and the 30-year loans.
20-year loan $
30-year loan $
(b) Find the total amount paid over the life of each loan.
20-year loan $
30-year loan $
(c) Find the savings per month by going to the 30-year loan.
$ =
(d) Find the increased total cost by going to the 30-year loan.
$= Answer by addingup(3677) (Show Source):
You can put this solution on YOUR website! M =P[r(1+r)^n]/[((1+r)^n)−1]
These variables represent the following inputs:
.
M is your monthly payment.
P is your principal, 140,000
r is your monthly interest rate, calculated by dividing your annual interest rate by 12, 0.095/12 = 0.00791
n is your number of payments (the number of months you will be paying the loan), in this problem first solve for 20 years = 240 and 30 years 360
Here is a picture of the formula you may find easier to follow:
