﻿ Jim Thomas borrows \$86000 at 10percent interest toward the purchase of a home. His mortgage is for2
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### Question

 Jim Thomas borrows \$86,000 at 10percent interest toward the purchase of a home. His mortgage is for20 years. (Use a Financial calculator toarrive at the answers. Round the final answers to the nearest wholedollar.)
 a. How much will his annual payments be? (Although home paymentsare usually on a monthly basis, we shall do our analysis on anannual basis for ease of computation. We get a reasonably accurateanswer.)
 Annual payments \$

 b. How much interest will he payover the life of the loan?
 Amount ofinterest \$

 c. How much should he be willing to pay to get out of a 10 percentmortgage and into a 8 percent mortgage with 20 years remaining onthe mortgage? Suggestion: Find the annual savings and thendiscount them back to the present at the current interest rate (8percent).
 Amount to bepaid \$

### Solution

x. Annual xxyxxxxx will xx \$xxxx.xxx. xxxxxx of xxxxxxxx will xx \$xxxxxx xxxx the xxxx of xxx xxxxxx xx% interest xxxx-------------------------xxxxxx of xxxxxxxx xxxx xx \$86641 xxxx the xxxx xx xxx loan xxx% interest xxxxxxxxxx xx xxxxxxxx over xxx term xx xxx xxxx: \$26539

c. xxxxxx to xx xxxx: \$xxxxxxxxxxxxx%8%xxxxxxxDiscounted xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx38222650017221367xxxxxxxxxxxxxxxxx57840613117091163xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx9680251921610805xxxxxxxxxxxxxxxxx11610745971510648xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx15422230821140359xxxxxxxxxxxxxxxxx1729572122835226xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx113181866412654014643