Texas Crammer Practice Exam

A borrower has a mortgage with a $100,000 amount and a monthly payment of $8.56 per thousand. What is the total interest paid over a 20-year period?

1. $50,000

2. $75,000

3. $105,440

4. $125,000

The correct answer is: $105,440

To determine the total interest paid over a 20-year period, we first need to calculate the total amount paid by the borrower and then subtract the initial loan amount from that total. The monthly payment is $8.56 per thousand, so for a $100,000 mortgage, the monthly payment can be calculated as follows: 1. Calculate the number of thousands in the mortgage amount: \[ \text{Number of thousands} = \frac{100,000}{1,000} = 100 \] 2. Calculate the monthly payment: \[ \text{Monthly Payment} = 100 \times 8.56 = 856 \] 3. Calculate the total amount paid over a 20-year period: - There are 12 months in a year, so over 20 years, the total number of payments is: \[ 20 \text{ years} \times 12 \text{ months/year} = 240 \text{ months} \] - The total amount paid is: \[ \text{Total Amount Paid} = 856 \times 240 = 205,440 \] 4. Finally, we