Loan Repayment Larry Davis borrows 150000 at 4 percent inter

Loan Repayment

Larry Davis borrows $150,000 at 4 percent interest toward the purchase of a home. His mortgage is for 15 years.

a.      How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.)

b.      How much interest will he pay over the life of the loan?

Solution

Principal = 150000

Interest = 4%

Tenure = 15 years

For the above monthly payment = 1109.53

Hence annual payments = 13314.36

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b) Interest 2015 $4,426.28

   2016   $5,637.90

$5,325.15, $4,999.65, $4,660.90, $4,308.34, $3,941.42, $3,559.55, 3,162.13, $2,748.51, $2,318.04, $1,870.03, $1,403.77, $918.51, $413.49, $22.07 for subsequent year

Total interest =

35655.55