Mortgages are annuities in that a fixed monthly fixed amount to the lender (assume monthly payments and an interest rate that compounds semi-annually).Sara is planning to take on a mortgage of $100 000 and believes she can afford monthly payments up to $700.How much interest would she save if she decided to pay off her mortgage over 20 years,rather than over 25 years? Her mortgage is at five percent interest calculated semi-annually.
A)$42 000
B)$18 120
C)$34 896
D)$16 776

Question

Quizplus · Accepted Answer

By paying off the mortgage over 20 years instead of 25 years, Sara would save $16,776 in interest. This is calculated by comparing the total interest paid over each term, considering the semi-annual compounding of the 5% interest rate.

Mortgages Are Annuities in That a Fixed Monthly Fixed Amount