A person who filed bankruptcy in the past is able to get a 30-year mortgage loan at a rate that is 6% higher than what they could have received if they had not filed. The interest rate this person pays on a $150,000 loan is 11%, compounded monthly. Assume the person could have received the lower interest rate on the loan and saved all of the difference in the payments for the first 10 years of the loan. If this person invested this total amount in an account paying simple interest at the rate of 2.5%, how much money would have accumulated in interest by the time the mortgage is paid off? a. $37,395.18 b. $74,790.37 c. $623.25 d. $3,739.52

Answers

Answer 1

Answer:

A. $37,395

Step-by-step explanation:

correct on edge! hope it helps :)

Answer 2

The savings from the difference between the 30–year loan at 11%, which

is 6% gives an interest when the mortgage is paid of approximately;

a. $37,395.18

How can the amount interest accumulated be calculated?

The amount paid is given as follows;

[tex]Monthly \ payment, \ M = \mathbf{\dfrac{P \cdot \left(\dfrac{r}{12} \right) \cdot }\left(1+\dfrac{r}{12} \right)^n }{\left(1+\dfrac{r}{12} \right)^n - 1}[/tex]

Which gives;

[tex]M = \dfrac{150000 \times \left(\dfrac{0.11}{12} \right) \cdot \left(1+\dfrac{0.11}{12} \right)^{30 \times 12} }{\left(1+\dfrac{0.11}{12} \right)^{30 \times 12} - 1} \approx \mathbf{1,428.49}[/tex]

Payment in 10 years = $1,428.49 × 120 ≈ $171,418.8

At the lower interest rate the person could have received (11 - 6 = 5)%, we have;

[tex]M = \mathbf{\dfrac{150000 \times \left(\dfrac{0.05}{12} \right) \cdot \left(1+\dfrac{0.05}{12} \right)^{30 \times 12} }{\left(1+\dfrac{0.05}{12} \right)^{30 \times 12} - 1}} \approx 805.23[/tex]

Payment in 10 years = $805.23 × 120 ≈ $92,227.6

Savings = $171,418.8 - $96,627.6 = $74,791.2

The time duration the savings is invested in the account = 30 years - 10 years = 20 years

Which gives;

Simple interest  after 20 years = $74,791.2 × 0.025 × 20 ≈ $37,396.6

Therefore;

The option that best gives the amount of money that would have accumulated in interest is the option a.

a. $37,395.18

Learn more about compound and simple interest here:

https://brainly.com/question/24557100

https://brainly.com/question/9245816


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a
x
n
=
n

a
x
a
x
n
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x
n
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