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question 34

True/False

Use the table to answer the question.
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Effect of Down Payment on the Cost of a $\$ 120,000$ Home with Interest at $8 \%$


$\begin{array}{ccccc}\text { Down Payment } & \text { Percent } & \text { Total Payment } & \text { Total Payment } & \text { Total Payment } \\\$ 00 & & 20 \text { Years } & 25 \text { Years } & 30 \text { Years } \\\$ 6,000 & 0 \% & \$ 240,895 & \$ 277,854 & \$ 316,987 \\\$ 12,000 & 10 \% & \$ 216,806 & \$ 250,068 & \$ 285,289 \\\$ 24,000 & 20 \% & \$ 192,715 & \$ 222,282 & \$ 253,588 \\\$ 30,000 & 25 \% & \$ 180,672 & \$ 208,389 & \$ 237,740 \\\$ 36,000 & 30 \% & \$ 168,626 & \$ 194,499 & \$ 221,890\end{array}$ Is the following statement true or false? For a $120,000 loan with interest rate 8% and 10% down, the total amount that can be saved by changing the term from 30 years to 25 years is $68,483, because the total amount of payments changes from $285,289 to $216,806.

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Definitions:

Options Contract

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date.

Future Contract

A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future.

Swap Contract

A financial derivative agreement between parties to exchange cash flows or other financial instruments over a specified time period.

Bond Discount

The discrepancy between a bond's nominal value and its selling price that occurs when the bond is retailed at a price lower than its nominal value.