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An executive wishes to take out a $1.2 m mortgage. The yearly interest rate on the loan is 1.95% and the loan is for 20 years. What will the monthly repayments be? Give your answer in dollars and cents. Do not include commas or the dollar sign in your answer.

Respuesta :

Mortgages are calculated using simple interest, so:

[tex]A=P(1+rt)[/tex]

P= principal amount

r= interest rate

t= time

For P=1.2mill

r=1.95%

t=20years

The simple interest will be:

[tex]A=1200000(1+0.0195\cdot20)=1668000[/tex]

Now divide the calculated amount by 20 to get the yearly fee:

[tex]\frac{1668000}{20}=83400[/tex]

And finally divide it by 12 to get the monthly fee:

[tex]\frac{83400}{12}=6950[/tex]

The exercutive will pay 6950 monthly