Joe and Victoria take out a $200,000 loan for a real estate investment. The $200,000 is compounded monthly for 20 years at a 4.5% interest rate. What is the estimated total amount paid on the loan?

Question

Mathematics

Boyd

3 April, 20:34

Joe and Victoria take out a $200,000 loan for a real estate investment. The $200,000 is compounded monthly for 20 years at a 4.5% interest rate. What is the estimated total amount paid on the loan?

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Answers (1)

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Collin Aguilar · Answer 1

Use the Compound Amount formula:

A = P (1 + r/n) ^ (nt), where P is the principal ($200,000), r is the interest rate as a decimal fraction (0.045), n is the number of compounding periods (240), and t is the number of years (20).

In this case

A = $200,000 (1 + 0.045/12) ^ (12*20)

= $491,093.27