How much interest will David pay over the life of his loan if he bought a $120,000 home with 20% down at 7.5% over 15 years?

How much interest will David pay over the life of his loan if he bought a $120,000 home with 20% down at 7.5% over 15 years?

• A. $64,188
• B. $31,813
• C. $160,188
• D. $96,000

Answer: (A)

To determine how much interest David will pay over the life of his loan, we first calculate the amount he will borrow and then figure out the total payment made over the life of the loan, subtracting the principal to find the interest. David is buying a home for $120,000 and making a 20% down payment. The down payment can be calculated as: Down payment = Purchase price * Down payment percentage Down payment = $120,000 * 20% = $24,000 Therefore, the loan amount is: Loan amount = Purchase price - Down payment Loan amount = $120,000 - $24,000 = $96,000 Now, David will repay this loan over 15 years at an interest rate of 7.5%. To find the total amount paid over the life of the loan, we can use the loan payment formula or a financial calculator. Using a standard loan payment formula or calculator for a fixed-rate mortgage, the monthly payment (M) can be found with the formula: M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1 ] where: - P = principal amount ($96,000) - r = monthly interest

To determine how much interest David will pay over the life of his loan, we first calculate the amount he will borrow and then figure out the total payment made over the life of the loan, subtracting the principal to find the interest.

David is buying a home for $120,000 and making a 20% down payment. The down payment can be calculated as:

Down payment = Purchase price * Down payment percentage

Down payment = $120,000 * 20% = $24,000

Therefore, the loan amount is:

Loan amount = Purchase price - Down payment

Loan amount = $120,000 - $24,000 = $96,000

Now, David will repay this loan over 15 years at an interest rate of 7.5%. To find the total amount paid over the life of the loan, we can use the loan payment formula or a financial calculator.

Using a standard loan payment formula or calculator for a fixed-rate mortgage, the monthly payment (M) can be found with the formula:

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

where:

• P = principal amount ($96,000)

• r = monthly interest