Project Discover® offers a home equity line of credit that lowers the total of t
ID: 2783004 • Letter: P
Question
Project Discover® offers a home equity line of credit that lowers the total of the monthly payments on several hypothetical loans by $366.12. (See the following table.) The home equity loan payment is based on " 10.49% APR annualized over a 10-year term." This means the loan is amortized at 10.49% with monthly payments. 1. Using this interest rate and monthly payments for the 10 years, how much money will still 2. 3. 4. be owed at the end of the 10 years? How much is paid during the 10 years? How much would the payment have to be to have the debt paid in the 10 years? How long would it take to pay off the debts under the original plan if interest were 15% on each loan? Discover Home Equity Monthly Amount Payment Amount Payment Current Monthly Payment Example LoanMonthly Loan Type Loan $186.00 PAlID OFF OFF $78.63 PAID OFF $25,000 $25,000 NONE NONE NONE $10,000 $12,500 $320.03 PAID Bank cards Auto loarn Department store cards Discover home equity line of credit Total $2,500 $218.54 $218.54 $25,000 $584.66Explanation / Answer
1 & 2. If we take the monthly payments as 218.54 and 10.49% APR, then it is only interest payments, so no principal will be repaid hence for the question 1 and 2 the answer would be 25000 and 0.
3. The EMI would come out to be using excel will be 337.2
4. It would take around 62 months to pay the existing loans with 15% interest
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