Based on amortization formula, Ethel will pay higher than Jack by $613.44
How much will each person pay?
The amount each is to pay for is calculated using the amortization formula:
- P = a ÷ {{[(1 + r/n)^nt] - 1} ÷ [r/n(1 + r/n)^nt]}
where
- P is monthly payment
- a is credit amount
- r is the interest rate
- t is the time in years
- n is number of times the interest is compounded
Amount paid by Ethel:
- a = $7725
- r = 9.14% = 0.0914
- t = 6 years
- n 12
P = a ÷ {{[(1 + r/n)^nt] - 1} ÷ [r/n(1 + r/n)^nt]}
P = $7725 ÷ {{[(1 + 0.0914/12)^12×6] - 1} ÷ [0.0914/12(1 + 0.0914/12)^12×6]}
P = $139.78
Total amount paid = $139.78 × 12 × 6 = $10,064.16
Amount paid by Jack:
- a = $7725
- r = 6.88% = 0.0688
- t = 6 years
- n = 12
P = a ÷ {{[(1 + r/n)^nt] - 1} ÷ [r/n(1 + r/n)^nt]}
P = $7725 ÷ {{[(1 + 0.0688/12)^12×6] - 1} ÷ [0.0688/12(1 + 0.0688/12)^12×6]}
P = $131.26
Total amount paid = $131.26 × 12 × 6 = $9,450.72
Difference in the amount Ethel and Jack will pay is = $10,064.16 - $9,450.72 = $613.44
Therefore, Ethel will pay higher than Jack by $613.44
Learn more about amortization at: https://brainly.com/question/24576997
