A person who filed bankruptcy in the past is able to get a 25-year mortgage loan at a rate that is 6% higher than what they could have received if they had not filed. The interest rate this person pays on a $130,000 loan is 13%, compounded monthly.

Assume this person could have received the lower interest rate on the loan and saved all of the difference on the payments for the first five years of the loan. If this person then invested this total amount in an account paying simple interest at the rate of 2%, how much money would have accumulated in interest by the time the mortgage is paid off?
a.
$547.37
b.
$32,842.38
c.
$13,196.95
d.
$17,179.23

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merp2017 merp2017 · Answer 1 · 2017-05-09T16:19:33+02:00

The answer is C. I just took the test lol :)

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topeadeniran2 topeadeniran2 · Answer 2 · 2022-05-09T15:03:05+02:00

The amount of money that would have been accumulated in interest by the time the mortgage is paid off is C. $13,196.95

From the information given, the loan amount is $130000, the time range is 25 years and the interest is 2%.

The amount of money that would have accumulated in interest by the time the mortgage is paid off will be:

= P(1 + r)^nm

where, p = principal

r = rate

m = number of years

n = number of compounding

Therefore, the amount of money will be:

= 130000 × (1 + 2%)^25

= 130000 × 1.02^25

= $13,196.95.

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