Assignment:
If a loan of (A) dollars is amortized over n years at an annual interest rate r ( as a decimal) compounded monthly, the montly payments (M) are given by the formula:
M = Ai / 1 - (1 + i) to the -12n power
a) If a home loan is made for $165,000 at 6% annual interest, compounded monthly, for 30 years, What is the montly payment on this loan?
b) Suppose a family figures it can handle a montly mortgage payement of $1450 per month. They have found the ideal house and have negotiated a price of $300,000. If the bank agrees to this monthly payment and charges 5% interest, (following the above formula) how many years will it take to pay off the entire $300,000?
Provide complete and step by step solution for the question and show calculations and use formulas.