You borrow $165,000 to buy a house.The mortgage rate is 4.5 percent and the loan period is 30 years.Payments are made monthly.If you pay the mortgage according to the loan agreement,how much total interest will you pay?

Question

Quizplus · Accepted Answer

To calculate the total interest paid, we need to use the formula for amortization, which is:

Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate) ^ (-Loan Period in Months))

Plugging in the values, we get:

Payment = (165,000 * 0.00375) / (1 - (1 + 0.00375) ^ (-30*12))
Payment = $839.22

To find the total interest paid, we need to subtract the original loan amount from the total amount paid over the loan period:

Total Interest = (Payment * Loan Period in Months) - Loan Amount
Total Interest = ($839.22 * 30*12) - $165,000
Total Interest = $135,971

Therefore, the correct answer is C.

You Borrow $165,000 to Buy a House