APPLICATIONS OF EXPONENTIAL AND APPLICATIONS OF EXPONENTIAL AND 
(Amortization Word Problems)
To solve an exponential or logarithmic word problem, convert the
narrative to an equation and solve the equation.
There is a relationship between the mortgage amount, the number
of payments, the amount of the payment, how often the payment
is made, and the interest rate. The following formulas illustrate
the relationship:
where P = the payment, r = the annual rate, M = the mortgage
amount, t = the number of years, and n = the number of payments
per year.
Problem 1: Find the monthly payments on a $100,000, 30-year
mortgage, with monthly payments at 9.5%. How much interest will you
pay over the 30 years?
Answer: The monthly payments are $840.85. You will pay a total
of $302,706 over the 30-year mortgage; $202,706 os this amount will
be interest.
Solution and Explanations:
substitute $100,000 for M (the mortgage amount), 12 for n (the number of payments per year, 30 for t (the number of years), and 9.5% for r (the annual interest rate)). You are solving for P (the monthly payment)
The mortgage payment is $840.85 per month.
If you would like to work another problem and review the answer and the solution, click on problem.
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