Some banks now have biweekly mortgages (that is, with payments every other week). Compare a 20-year, $130,000 loan at 7.5% by finding the payment size and the total interest paid over the life of the loan under each of the following conditions. (Round your answers to the nearest cent.) (a) Payments are monthly, and the rate is 7.5%, compounded monthly. payment size $ total interest $ (b) Payments are biweekly, and the rate is 7.5%, compounded biweekly. (Assume a standard 52-week year.) payment size $ total interest $
Some banks now have biweekly mortgages (that is, with payments every other week). Compare a 20-year, $130,000 loan at 7.5% by finding the payment size and the total interest paid over the life of the loan under each of the following conditions. (Round your answers to the nearest cent.) (a) Payments are monthly, and the rate is 7.5%, compounded monthly. payment size $ total interest $ (b) Payments are biweekly, and the rate is 7.5%, compounded biweekly. (Assume a standard 52-week year.) payment size $ total interest $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Some banks now have biweekly mortgages (that is, with payments every other week). Compare a 20-year, $130,000 loan at 7.5% by finding the payment size and the total interest paid over the life of the loan under each of the following conditions. (Round your answers to the nearest cent.)
(a) Payments are monthly, and the rate is 7.5%, compounded monthly.
(b) Payments are biweekly, and the rate is 7.5%, compounded biweekly. (Assume a standard 52-week year.)
| payment size | $ |
| total interest | $ |
(b) Payments are biweekly, and the rate is 7.5%, compounded biweekly. (Assume a standard 52-week year.)
| payment size | $ |
| total interest | $ |
Expert Solution
Information;
a.
Loan amount (P) = $130,000
Monthly interest rate (r) = 0.00625 (i.e. 0.075/12)
Monthly period (n) = 240 (i.e. 20 years * 12)
Payment size = ?
Total interest = ?
b.
Loan amount (P) = $130,000
Biweekly interest rate (r1) = 0.00288461538461538 (i.e. 0.075 / 26)
Monthly period (n1) = 520 (i.e. 20 years * 26)
Biweekly size = ?
Total interest = ?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education