Calculate the total payments on a $200,000 mortgage if payment is made at the end of each month and the annual interest rate is 4.25 percent for 15 years.
A)$287,456.36
B)$2,469,985.20
C)$199,980
D)$270,820.80

Question

Quizplus · Accepted Answer

To calculate the total payments on a mortgage, we need to use the formula for the monthly payment on a mortgage:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

where:
M = monthly payment
P = the principal, or the amount of the loan
i = the annual interest rate divided by 12 (for monthly payments)
n = the total number of payments (15 years = 180 months)

Plugging in the values we get:

M = 200,000 [0.00354(1 + 0.00354)^180] / [(1 + 0.00354)^180 – 1]
M = $1,479.38

So the total payments over 15 years would be:

Total payments = M x n
Total payments = $1,479.38 x 180
Total payments = $266,088.40

Therefore, the closest choice to this value is D) $270,820.80.

Calculate the Total Payments on a $200,000 Mortgage If Payment