You borrowed $185,000 for 30 years to buy a house. The interest rate is 4.35 percent, compounded monthly. If you pay all of your monthly payments as agreed, how much total interest will you pay on this mortgage? (Round the monthly payment to the nearest whole cent.)

Question

Quizplus · Accepted Answer

Using the formula for monthly mortgage payments:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where M is the monthly payment, P is the principal (185,000), i is the monthly interest rate (4.35%/12 = 0.003625), and n is the total number of months (30 years x 12 months per year = 360 months).

M = 185,000 [0.003625(1 + 0.003625)^360] / [(1 + 0.003625)^360 – 1]

M = $926.23 (rounded to the nearest whole cent)

So you will pay $926.23 every month for 30 years.

To calculate the total amount of interest paid, we can use the formula:

Total Interest = (Monthly Payment x Number of Payments) – Principal

Total Interest = ($926.23 x 360) - $185,000

Total Interest = $146,542.80

Therefore, the best choice is C, $146,542.

You Borrowed $185,000 for 30 Years to Buy a House