Samuel paid $850 000.00 for a new house. He paid $140 000.00 down and financed the balance by making equal payments at the end of every month for 25 years. Interest is 5.1% compounded monthly. What is the total cost of the building for Samuel?

Question

Quizplus · Accepted Answer

The total cost of the building for Samuel is the sum of the down payment and the total amount of interest paid over the life of the loan. The total amount of interest paid can be calculated using the formula:Total interest = Principal * (r * (1 + r)^n) / ((1 + r)^n - 1)where:* Principal is the amount of the loan* r is the monthly interest rate* n is the number of monthsIn this case, the principal is $850,000 - $140,000 = $710,000, the monthly interest rate is 5.1% / 12 = 0.00425, and the number of months is 25 * 12 = 300.Plugging these values into the formula, we get:Total interest = $710,000 * (0.00425 * (1 + 0.00425)^300) / ((1 + 0.00425)^300 - 1)= $710,000 * (0.00425 * 2.7144) / (2.7144 - 1)= $710,000 * 0.01152 / 1.7144= $49,953.60Therefore, the total cost of the building for Samuel is $140,000 + $49,953.60 = $1,397,618.

Samuel Paid $850 000