Robinson Company purchased Franklin Company at a price of $2,500,000. The fair market value of the net assets purchased equals $
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Answer:
His total amount of interest over the period of 30 years would be $608,290.26.
Explanation:
His loan will be calculated based upon the remaining principle after each monthly payment.
For example his 1st payment @6.25% interest rate on full amount of $500,000 would be ($500,000*6.25%= $31,250/12 = $2,604.17). We divide the total amount of interest by 12 to get the monthly payment amount.
Now after we get the interest amount, we reduce this interest amount from his total monthly payment of $3,078.59 to get the monthly principle repayment which comes out at $474.42 for the first month.
After that we reduce this principle repayment from his original loan balance of $500,000 to get his new balance of $499,525 on which interest will be levied i.e. ($499,525*6.25%/12 = 2601.7). This step goes on for 30 years and his total interest payment in those 30 years will be $608,290.26.
