The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $150,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 5.5%/year compounded monthly, payable over a 25-year period in 300 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 5.25%/year compounded monthly, payable over a 15-year period in 180 equal monthly installments. (a) Find the monthly payment required to amortize each of these loans over the life of the loan. option A $ option B $ (b) How much interest would the Martinezes save if they chose the 15-year mortgage instead of the 25-year mortgage?
The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $150,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 5.5%/year compounded monthly, payable over a 25-year period in 300 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 5.25%/year compounded monthly, payable over a 15-year period in 180 equal monthly installments. (a) Find the monthly payment required to amortize each of these loans over the life of the loan. option A $ option B $ (b) How much interest would the Martinezes save if they chose the 15-year mortgage instead of the 25-year mortgage?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $150,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.)
Option A: A fixed-rate mortgage at an interest rate of 5.5%/year compounded monthly, payable over a 25-year period in 300 equal monthly installments.
Option B: A fixed-rate mortgage at an interest rate of 5.25%/year compounded monthly, payable over a 15-year period in 180 equal monthly installments.
Option B: A fixed-rate mortgage at an interest rate of 5.25%/year compounded monthly, payable over a 15-year period in 180 equal monthly installments.
(a) Find the monthly payment required to amortize each of these loans over the life of the loan.
(b) How much interest would the Martinezes save if they chose the 15-year mortgage instead of the 25-year mortgage?
$
| option A $ |
| option B $ |
(b) How much interest would the Martinezes save if they chose the 15-year mortgage instead of the 25-year mortgage?
$
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