Maurice took out a 25-year loan from his bank for $165,000 at an APR of 2.4%, compounded monthly. If his bank charges a prepayment fee of 6 months' interest on 80% of the balance, what prepayment fee would Maurice be charged for paying off his loan 11 years early? A. $818.55 B. $740.77 C. $585.55 D. $731.94
Accepted Solution
A:
First compute 25-11=14 years. Computing the yearly interest: [tex]165,000(1+0.024)^{25}=298526[/tex] [tex] \frac{298526}{25}=11941,04/year[/tex] After 14 years, the amount paid by maurice s the following: [tex]11941,04\times11=\$131351[/tex] So there remains [tex]298526-131351=\$167175[/tex] Compute 80% of \$167175: [tex]\$167175\times0.8=\$133740[/tex] 2.4/6=0.4% Compute 0.4% of $133740: [tex]$133740\times0.004=\$534[/tex]