how many month would it take to pay off $210,000 at ayearly rate of 4% with payments of $1400.

Question

m = P.r

1-(1+r)-n

m= 1400

r= .04

p=210,000

 

Answer 1

Assuming simple interest, the interest after 12 months would be 0.04×210000=$8400.

The total payments after 12 months is 1400×12=$16800.

Simple interest means that the same amount (16800-8400=$8400) is deducted from what’s owing each year.

In T years therefore, $8400T would be paid off, so when 8400T=210000, the whole amount would be paid off, and T=210000/8400=25 years or 300 months.

(The answer is different for compound interest, when it would take only about 17 years 4 months to pay off the amount. A different formula is used.)