Larry Davis borrows $76,000 at 12 percent interest toward the purchase of a home. His mortgage is for 30 years.
Calculate your final answer using the formula and financial calculator methods.
a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. How much interest will he pay over the life of the loan? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c. How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage? Assume current interest rates are 10 percent. Carefully consider the time value of money. Disregard taxes. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)