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15 February, 19:50

You can afford a $700 per month mortgage payment. You've found a 30 year loan at 5% interest.

a.) How big of a loan can you afford?

b.) How much total money will you pay the loan company?

c.) How much of that money is interest?

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  1. 15 February, 21:46
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    P=loan (present value)

    i=interest rate = 5%/12=0.05/12

    n=30 years = 360 months

    A=amount each payment = 700

    then by the amortization formula,

    P=A ((i+1) ^n-1) / (i * (1+i) ^n)

    =700 ((1+.05/12) ^360-1) / ((.05/12) * (1+.05/12) ^360)

    =130397.13

    Total money = 700*360=252000

    Interest=252000-130397.13=121502.87 (almost 50%).
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