To determine a. To calculate monthly payments and total loan costs. b. To discuss pros and cons of each loan. Explanation Given: Option 1 30-year loan at an APR of 7.15% Principal (P) = $60000 Interest rate (i) = 7.15% APR = 0.0715 12 per month Number of payments (n) = 30×12 months = 360 months Option 2 15-year loan at an APR of 6.75% Principal (P) = $60000 Interest rate (i) = 6.75% APR = 0.0675 12 per month Number of payments (n) = 15×12 months = 180 months Formula Used: Principal = P Monthly equivalent payment = A Interest rate = i No of payments = n The formula to calculate, P is P = A × { ( 1 + i ) n – 1 } i ( 1 + i ) n A = P × i ( 1 + i n ) { ( 1 + i ) n − 1 } Calculation: Option 1 30-year loan at an APR of 7.15% Principal (P) = $60000 Interest rate (i) = 7.15% APR = 0.0715 12 per month Number of payments (n) = 30×12 months = 360 months PMT = $ 60000 × ( 0.0715 12 ) × ( 1 + 0.0715 12 ) 360 [ ( 1 + 0...

6th Edition

ISBN: 9780137721023

Author: Bennett

Publisher: PEARSON C

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Chapter 4.D, Problem 39E

To determine

a. To calculate monthly payments and total loan costs.

b. To discuss pros and cons of each loan.

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Chapter 4.D, Problem 38E

Chapter 4.D, Problem 40E

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