Answer:
Interest = $188,264.78
Explanation:
given data
present value = $245,000
rate = 20 %
finance closing costs = 3 percent
time = 30 year
fixed rate mortgage = 5 % annual = [tex]\frac{0.05}{12}[/tex] monthly
to find out
interest will the borrower pay
solution
we will apply here present value of annuity formula for find annuity that is
present value annuity = Annuity × [tex]\frac{1-(1+r)^{-t}}{r}[/tex] ..........1
put here value we get
$245,000 × 0.80 × 1.03 = Annuity × [tex]\frac{1-(1+\frac{0.05}{12})^{-30*12}}{\frac{0.05}{12}}[/tex]
solve it we get
$201,880 = annuity × [tex]\frac{0.7762}{0.0042}[/tex]
annuity = $1,083.74
so now we get interest that is
interest = annuity × 360 - present value annuity ..............2
interest = $1,083.74 × 360 - ( $245,000 × 0.80 × 1.03 )
Interest = $188,264.78
