Aphrodite took out a 30-year loan from her bank for $170,000 at an APR of 7.2%, compounded monthly. If her bank charges a prepayment fee of 6
months' interest on 80% of the balance, what prepaymeant fee would
Aphrodite be charged for paying off her loan 12 years early?
A. $3246.74
B. $4078.20
C. $4895.83
D. $4921.46

  A. $3246.74

Step-by-step explanation:

The monthly payment can be found from the amortization formula.

  A = P(r/n)/(1 -(1 +r/n)^(-nt))

where P is the principal amount, r is the annual rate compounded n times per year for t years.

Filling in the values, we compute the monthly payment to be ...

  A = $170,000(.072/12)/(1 -(1 +.072/12)^(-12·30)) = $1153.94

__

The remaining balance after t years will be ...

  B = P(1 +r/n)^(nt) -A((1 +r/n)^(nt) -1)/(r/n)

For the given initial principal and the computed payment, after 18 years, the balance will be ...

  B = $170000(1 +.072/12)^(12·18) -$1153.94((1 +.072/12)^(12·18) -1)/(.072/12)

  B = $111,054.71

The prepayment penalty appears to be ...

  (r/2)(0.80B) = (.072/2)(0.80)($111,054.71) = $3,198.38

The closest listed answer choice is ...

  A.  $3246.74

Please ask your teacher how to get the answer, since none of the offered choices appear to be correct.

28

step-by-step explanation:

8+8+6+6