When most people buy a house, they take out a mortgage to cover at least part of the cost of the home and then pay the loan back over time. The most common kind of mortgage is a 30-year loan. A couple buys a home and takes out a 30-year loan in the amount of $220,000 (called the principal). They decide they want to pay it off early to save money on interest. They set a goal of reducing the principal amount of the loan to $170,000 in four years. Suppose during the first two years of their four-year timeline, the couple pays down the loan by 10%. By what percent do they need to pay down the rest of the loan to reach their overall goal?
A. 10%
B. 14%
C. 18%
D. 20%
Answer:B
When most people buy a house, they take out a mortgage to cover at least part of the cost of the home and then pay the loan back over time. The most common kind of mortgage is a 30-year loan. A couple buys a home and takes out a 30-year loan in the amount of $220,000 (called the principal). They decide they want to pay it off early to save money on interest. They set a goal of reducing the principal amount of the loan to $170,000 in four years. Suppose during the first two years of their four-year timeline, the couple pays down the loan by 10%. By what percent do they need to pay down the rest of the loan to reach their overall goal?
A. 10% B. 14% C. 18% D. 20%
Explanation: B