Use the formula of the present value of annuity ordinary to find the monthly payment of the loan The formula is Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)] Pv present value 75500 PMT monthly payment? R interest rate 0.065 K compounded monthly 12 N time 40 years So we need to solve for pmt PMT=Pv÷[(1-(1+r/k)^(-kn))÷(r/k)] PMT=75,500÷((1−(1+0.065÷12)^( −12×40))÷(0.065÷12)) =442.02 (this is the monthly payment) Now find the amount of interest Total interest=total paid-present value Present value=75500 Total paid 442.02×12months×40years =212,169.6 Total interest=212,169.6−75,500 =136,669.6 The answer is 136,669.6
Suppose a $75,500 mortgage is to be amortized at 6.5% interest. Find the total amount of interest that would be paid for a 40 year term. What is the amount of interest for a 40 year mortgage?