# mortgage

• June 16th 2011, 08:17 PM
reallylongnickname
mortgage
Paula has bought a condo and requires a mortgage of $95,000. A trust company offers her a 20yr mortgage at 4.72%/a compounded semi-annually. The equivalent monthly rate is determined to be 0.003895204. Q. a) Calculate the monthly payment. b) Calculate the total interest paid on this mortgage. a) I figure to use the formula: $PV = R(1-(1+i)^-n) / i$ I then rearrange the formula: $R =PV * i / (1-(1+i)^n$ Now I plugged in the numbers into formula: $95000 * 0.0236 / (1-(1+ 0.0236)^-20)$ =$6013.68 per month
• June 16th 2011, 10:50 PM
TKHunny
Re: mortgage
You seem a bit confused on the units of time.

$0.0472$ is the annual nominal interest rate. 20 is the number of years for the loan.

$0.0236$ is the semi-annual effective interest rate. 40 is the number of half-years for the loan.

$(1.0236)^{\frac{1}{6}}-1 = 0.0038952042$ is the monthly effective interest rate. 240 is the number of months for the loan.