A house sells for $1007.00. With an interest rate of 4% . What are the monthly payments for.

a. 15 yrs.

b 12 yrs.

Solution:

(a)

P = 1007*(4%/12)*(1+4%/12)^(15*12)/((1+4%/12)^(15*12)-1) = 7.45

So the monthly payment is $7.45

(b)

P = 1007*(4%/12)*(1+4%/12)^(12*12)/((1+4%/12)^(12*12)-1) = 8.82

So the monthly payment is $8.82