Assume that your aunt sold her house in December 31, and to help close the sale
ID: 2479745 • Letter: A
Question
Assume that your aunt sold her house in December 31, and to help close the sale she took a quoted (or nominal) interest rate of 10%; it calls for payments every 6 months, beginning on June 30, and is to be amortized over 10 years. Now, 1 year later, your aunt must inform the IRS and the person who bought her house about the interest that was included in the two payments made during the year. This interest will be income to your aunt and a deduction to the buyer of the house. To the closest dollar, what is the total amount of interest that was paid during the first year?
Explanation / Answer
Interest 10% Semi annual interest 5% Present Value 40000 10000 PMT= PV/PVIFA(5%,20) PVIFA(5%,20) 12.4622 12.4622 PMT 3209.7 802.4 Beginning Balance B Total Payment Interest payment Total Payment-Interest Payment T Ending balance B-T 1 40000 3209.7 2000 1209.7 38790.3 2 38790.3 3209.7 1939.5 1270.2 37520.1 So total interest payment=2000+1939.5 3939.5 3940 Ans Beginning Balance B Total Payment Interest payment Total Payment-Interest Payment T Ending balance B-T 1 10000 802.4 500 302.4 9697.6 2 9697.6 802.4 484.9 317.5 9380.0 So total interest payment=500+484.9 984.9 985 Ans Dear student the second mortgage amount was missing I took the question from chegg which has two questions with two mortgage $10000 and $40000 So I have calculated both. But whatever the mortgage amount the interest calculation steps are same than there will be change in mortgage amount and than in interest accordingly.