A Loan Officer States,"Thousands of Dollars Can Be Saved by Switching

question 17

Multiple Choice

A loan officer states,"Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at an interest rate of .75% a month versus a 15-year mortgage with an interest rate of .7% a month.Both mortgages are for $100,000 and have monthly payments.What is the difference in total dollars that will be paid to the lender under each loan? (Round the monthly payment amounts to 2 decimal places.)

• A) $89,211
• B) $98,406
• C) $113,465
• D) $124,300

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Definitions:

Balance Sheet

A financial statement that shows a company's assets, liabilities, and stockholders' equity at a specific point in time.

Equity Method

An accounting technique used by companies to assess their investments in other companies, where the investment's carrying value is adjusted to reflect the investor's share of the investee's income or losses.

Cash Dividends

Payments made by a company out of its profits to its shareholders, usually in the form of cash.

Goodwill

An intangible asset that represents the excess of the purchase price over the fair market value of an acquired company's identifiable assets and liabilities.