A loan officer states,"Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at an interest rate of .75% a month versus a 15-year mortgage with an interest rate of .7% a month.Both mortgages are for $100,000 and have monthly payments.What is the difference in total dollars that will be paid to the lender under each loan? (Round the monthly payment amounts to 2 decimal places.)
A) $89,211
B) $98,406
C) $113,465
D) $124,300

Question

Quizplus · Accepted Answer

$100,000 = PMT([1 / (0.0075)] − 1 / {(0.0075)[(1.0075)]^{30 × 12}})PMT = $804.62$100,000 = PMT([1 / (0.007)] − 1 / {(0.007 )[ 1.007)]^{15 × 12}})PMT = $ 978.87Total difference = ($804.62 × 12 × 30) − ($978.87 × 12 × 15) = $113,465

A Loan Officer States,"Thousands of Dollars Can Be Saved by Switching