Respuesta :
Using compound interest, it is found that:
a) The monthly payments are of $3,401.49.
b) The total of all monthly payments for 30 years is of $1,224,536.
c) The total interest is of $794,536.
d) The total interest is greater.
What is compound interest?
The amount of money earned, in compound interest, after t years, is given by:
[tex]A(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
In which:
- A(t) is the amount of money after t years.
- P is the principal(the initial sum of money).
- r is the interest rate(as a decimal value).
- n is the number of times that interest is compounded per year.
- t is the time in years for which the money is invested or borrowed.
For the parameters, we have that:
- The Fortunato family is borrowing $430,000 to buy a home, hence P = 430000.
- 30-year mortgage, hence t = 30.
- Rate of 3.55%, hence r = 0.0355.
- Yearly compounding, hence n = 1.
For practicality, first we are going to solve item b.
Item b:
[tex]A(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
[tex]A(30) = 430000\left(1 + \frac{0.0355}{1}\right)^{30}[/tex]
[tex]A(30) = 1224536[/tex]
The total of all monthly payments for 30 years is of $1,224,536.
Item a:
$1,224,536 is paid in 30 x 12 = 360 months, hence:
1224536/360 = $3,401.49.
The monthly payments are of $3,401.49.
Item c:
The interest is the total subtracted from the principal, hence:
1224536 - 430000 = $794,536.
The total interest is of $794,536.
Item d:
Loan of $430,000, interest of $794,536, hence the total interest is greater.
You can learn more about compound interest at https://brainly.com/question/25781328
