00:01
Hello, so the question says if your monthly loan payment is $1 .519 and your nominal annual mortgage rate is 60 % or 6 % for 40 years and pounded monthly, how much total interest will you pay over the life of the loan? so to calculate the total interest paid over the life of the loan, we need to use a formula for calculating the total amount paid for a loan with compound interest.
00:32
So it's going to be the total amount paid equals a monthly payment times number of payments, okay, and the total interest paid is going to equal to the total amount paid minus the original loan amount.
00:53
Alright, so first we need to calculate the loan number of payments since the loan term is 40 years and the interest is compounded monthly.
01:02
The total number of payments can be calculated as follows.
01:06
So the total number of payments is going to equal to the number of years which is 40 times number of months per year which is 12 months per year and that's going to equal to 480.
01:24
Next, we'll calculate the total amount paid.
01:28
It's going to be 519 times 480 which is going to equal to $248 ,520.
01:43
Now let's calculate the interest paid.
01:45
So we're going to subtract this from the original loan.
01:49
Now since we don't have the original loan amount, we can't calculate the exact total interest paid.
01:56
However, we can approximate it by finding the original loan amount using the monthly payment interest rate and the loan term.
02:04
Then we'll calculate the total interest paid.
02:06
So let's assume the original loan amount principle is x, alright, and we can use the following formula which is going to be monthly payment equals to the principle which is x times monthly interest rate.
02:21
So it's going to be, let me go ahead and get rid of this...