Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender. Youve decided to buy a house that is valued at $1 million. You have $200,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $800,000 mortgage, and is offering a standard 30-year mortgage at a 9% fixed nominal interest rate (called the loans annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.)

Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $800,000 loan at a fixed nominal interest rate of 9% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be ?(Note: Round the final value of any interest rate used to four decimal places. )

It is likely that you wont like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage? $1,096,664.83 $1,182,341.77 $856,769.40 $1,010,987.89