Suppose that you need a loan of $60,000. Find the total cost of all the monthly payments for each of the loan options listed below.

Question

Assume that the loans are fixed rate. Round the total cost of each loan to the nearest dollar

 

Option 1- a 30 year fixed loan at an APR of 7%

Option 2- a 15 year fixed loan at an APR of 6.5%

 

 

Need steps please

 

 

A- Option 1- $137,712

    Option 2- $89,071

 

B- Option 1- $149,725

    Option 2- $99,071

 

C- Option 1- $245,608

   Option 2- $186,056

 

D-Option 1- $143,705

   Option 2- $94,079

 

Answer 1

Each loan is an ordinary annuity whose present value, interest rate, and time period are known and whose rent you have to determine. A financial calculator solves this easily, but you can also use a spreadsheet function of an annuity formula. the formula approach is complicated. For option 1, loan A you have the following to input into the calculator or spreadsheet:

 

PV=137,712

FV = 0

N = 30 yrs x 12 = 360 months

i% = 7%/12 = .58333

PMT = ?

 

The monthly payment is $782.79

 

That should help you solve all the others.