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?
a.
The formula for monthly payment is:
Fixed monthly payment =
Where Principal P = 100,000 birr
For 15-year mortgage at 8.75%
n=12months per year, t=15 years, rate r=0.0875 yearly
Therefore,
The monthly payment =
=
= 999.45 birr
Answer: Monthly payment = 999.45 birr
b.
For the 15-year fixed mortgage at 8.75%, the monthly payment = 999.45 birr for (12x15) = 180 periods
Therefore, the total amount to be paid = (999.45 x 180)= 179,901 birr
The interest = total amount – principal = (179,901- 100,000) = 79,901 birr
Answer: The interest to be paid = 79,901 birr
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