$6,664 D | Question 3 20 pts 01 You have a mortgage balance of $117,000 that wil

Question

$6,664 D | Question 3 20 pts 01 You have a mortgage balance of $117,000 that will require you to make 120 more payments of $1,200, starting next month. Alternatively, you can take out a loan today for $117,000 with an interest rate of 3% APR compounded monthly and pay off the original mortgage. The new loan will require you to make 120 more payments, starting next month. If your investments earn 2.00% APR, compounded monthly, how much will you save in py terms by taking out the new loan to pay off the original mortgage? $7.634 $7,484 $7,863 $7,411 DQuestion 4 20 pts MacBook Air F8 F9 F7 F5 F3 F4

Explanation / Answer

Firstly let us calculate the amount of the Monthly Loan installments of the new loan.

Using Financial Calculator: PV ---> 117000

I/Y ---> 0.25......(Calculation: (3/12 = 0.25))

N ---> 120

Compute---> PMT.

Monthly Installment comes out to be $1129.76

Monthly Installments of the old Loan = $1200

Therefore, Per month savings = (1200 - 1129.76) = $ 70.24

Present Value of all the savings for 120 months is calculated using Financial Calculator as below:

PMT --> 70.24

N= 120

I/Y --> 0.1667...........Calculation: 2/12 = 0.1667

Compute --> PV

The answer is : $7634 (option 1)

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