Given:
Loan Amount: $175,000
Loan Terms: 30 years = 360 months = n (convert years to months)
Interest Rate: 7% =
Monthly Loan Payment Formula:
Monthly Loan Payment =
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
Monthly Loan Payment = $1,164.28 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $1,164.28 * 360 = $419,140.80
Interest Cost = Total Cost – Loan Amount
Interest Cost = $419,140.80 – $175,000 = $244,140.80
Interest Cost is greater than the Loan Amount
Loan Amount: $175,000
Loan Terms: 30 years = 360 months = n (convert years to months)
Interest Rate: 7% =
7/100
= 0.07 = r (convert percent to a decimal)Monthly Loan Payment Formula:
Monthly Loan Payment =
Loan Amount *
r
/
12
/
1 – ( 1+ r/12
) -n
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
175,000 *
0.07
/
12
/
1 – ( 1+ 0.07/12
) -360
Monthly Loan Payment = $1,164.28 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $1,164.28 * 360 = $419,140.80
Interest Cost = Total Cost – Loan Amount
Interest Cost = $419,140.80 – $175,000 = $244,140.80
Interest Cost is greater than the Loan Amount
