Question

a manufacture has 15 years, 8.5 percent mortgage for 100,000 birr on a building. payments are made monthly.

a. find the monthly payment

b. how much interest will be paid?

Answer 1

m=15

r=8.5%

PV=100000 birr

a)

monthly payment is given as:

$=\frac{PV (\frac{r}{n})(1+\frac{r}{m})^{(mn)}}{(1+\frac{r}{m})^{mn}-1}$

$=\frac{100000(\frac{0.085}{12})(1+\frac{0.085}{12})^{(12×15)}}{(1+\frac{0.085}{12})^{12×15}-1}$

$=984.74\space{birr}$ is the monthly payment

b) the total amount to be repaid is

$=984.74×(12×15)$

$=177253.2\space{birr}$

Interest$=177253.2-100000$

$=77253.2\space{birr}$ is the interest paid on the mortgage