You have just taken out a 15-year, $375,000 mortgage on your new home. This mortgage is to be repaid in equal end-of-month installments. If the nominal interest rate on the mortgage is 9.52 percent, what is the total amount of interest you will pay over the life of the mortgage?
HOW DO I COMPUTE THIS ON FINANCIAL CALCULATOR??
a.$330,666.50
b.$419,946.45
c.$426,559.78
d.$380,266.47
e.$410,026.46
This is how you do this one
Do 2nd FV and turn the calculator off and on to clear any previous work the do 2nd CE/C to also clear everything, just in case, so we don’t have any problems.
Do 15 X 12 = 180 (because you are making monthly installments so you are making 180 payments all together.)
Then take 9.52 / 12 = 0.7933 (you have to spread the annual rate over a year.)
These instructions are for the BA 2 Financial Calculator
So punch in
180 N
0.7933 I/Y
-375,000 PV
CPT PMT = $3920.2789 so your payment is going to be $3920.28
Then hit 2nd PV (AMORT)
P1=1 Hit down button
P2 = 180 Hit down button
Balance = 0 Hit down Button
PRN = $375,000 Hit down button
INT = $330,666.50
So the total interest paid for the life of the loan is roughly $330,666.50, so the answer is A.
I Hope this helps!
Go out to bankrate.com and use the amortization schedule. If you put in the 375000, 15 year payment and interest rate, you will get the answer when you hit calculate by taking the monthly payment it calculates x 180 months. Take that number and subtract your 375000 The answer you come up with is one of your choices above.
References :
This is how you do this one
Do 2nd FV and turn the calculator off and on to clear any previous work the do 2nd CE/C to also clear everything, just in case, so we don’t have any problems.
Do 15 X 12 = 180 (because you are making monthly installments so you are making 180 payments all together.)
Then take 9.52 / 12 = 0.7933 (you have to spread the annual rate over a year.)
These instructions are for the BA 2 Financial Calculator
So punch in
180 N
0.7933 I/Y
-375,000 PV
CPT PMT = $3920.2789 so your payment is going to be $3920.28
Then hit 2nd PV (AMORT)
P1=1 Hit down button
P2 = 180 Hit down button
Balance = 0 Hit down Button
PRN = $375,000 Hit down button
INT = $330,666.50
So the total interest paid for the life of the loan is roughly $330,666.50, so the answer is A.
I Hope this helps!
References :