(a) Suppose you borrowed $400,000 for a home mortgage on January 1, 2010 with an annual interest rate of 3.5% per year compounded monthly. If you didn't make any payments and were only charged the interest (and no late fees), how much would you owe on the mortgage on January 1, 2030?
Accepted Solution
A:
Answer:$804,680.814 ( approx )Step-by-step explanation:The amount formula in compound interest is,[tex]A=P(1+\frac{r}{n})^{nt}[/tex]Where, P is the principal amount,r is the annual rate of interest,n is the compounding periods in a year,t is the time in years,Given, P = $ 400,000,r = 3.5 %=0.035,n = 12, ( 1 year = 12 months )t = 20 years,Thus, the amount would be,[tex]A=400000(1+\frac{0.035}{12})^{240}[/tex][tex]=400000(\frac{12.035}{12})^{240}[/tex][tex]=\$ 804680.813963[/tex][tex]\approx \$ 804680.814[/tex]