Question

Fred Myers bought a home with a 13% adjustable rate mortgage for 20 years. He paid $11.72 monthly per thousand on his original loan. At the end of 2 years he owes the bank $60,000. Since interest rates have decreased to 10%, the bank will renew the mortgage at this rate, or Fred can pay the bank $60,000. He decides to renew and will now pay $9.66 monthly per thousand on his loan. (You can ignore the small amount of principal paid during the 2 years.)

What was the old monthly payment?

What is the new monthly payment?

What is the percent decrease in his monthly payment (to the nearest tenth)?

Answer 1

11.72×60=703.2

9.66×60=579.6

((9.66÷11.72)−1)×100=−17.6%

Answer 2

Per thousand value = 60000/1000 = 60

What was the old monthly payment?

`11.72*60` = $703.20

What is the new monthly payment?

`9.66*60` = $579.60

What is the percent decrease in his monthly payment (to the nearest tenth)?

`((9.66)/(11.72)-1)*100`

= -17.57%