Can someone help me with this pls?
Not entirely sure if i'm on the ball but here goes:
Bank 1: $3585.04 per month for 20 years = $3585.04*240
= Total Payed = $860409.60
Total Payed - $500,000 = Interest Paid
Interest Paid = $360,409.60
Bank 2: $3585.04 per month for first 10 years = $3585.04*120
= total payed in 10 years = $430204.60 and keeping that in mind.
Using financial Solver:
N:120 (10 years)
I: 5%
PV: $500,000
PmT: $3585.04
FV: $266,811.57 Found because all other values are given to us. (Our new Present value after the 10 year mark)
PpY: 12
CpY: 12
Now with $266,811.57 left to pay for the remaining 10 years the financial solver is updated as follows:
N:120 (10 years)
I: 7%
PV: $266,811.57
PmT: $2409.34FV: 0
PpY: 52
CpY: 52
Now as we already payed $430204.60 in the first 10 years, we now pay $2409.34 per month for the last 10 years, so:
$430204.60 + $2409.34 * 120 = Total Payed in 20 years
Total Payed in 20 years = $719.325.60
Total Payed - $500,000 = Interest Paid
Interest Paid = $219,325.60
Now using both banks' Interest Paid amounts:
Bank A (Interest paid): $360,409.60
Bank B (Interest paid): $219,325.60Therefore,
Bank B will incur the lower interest amount and is the recommended bank for Shannon
Also, if this question was just one mark, could we not just assume it is Bank B because shorter the compound, lesser the interest and duration of loan...
Either way correct me if I'm wrong guys. xx