Answer:
In PV term, we are saving 7,633.33 dollars
Explanation:
First, we calculate the PTm of the bank loan:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV $117,000.00
time 120 months
monthly - rate 0.0025 (0.03 annual rate /12 months)
[tex]117000 \div \frac{1-(1+0.0025)^{-120} }{0.0025} = C\\[/tex]
C $ 1,129.761
1,200 - 1,129.76 = 70.24
Each month we are saving 70.24 dollars
if this yield 2% we cancalcualte the present value of the savings:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C $70
time 120
rate 0.001666667 (0.02/12)
[tex]70.24 \times \frac{1-(1+0.0016667)^{-120} }{0.0016667} = PV\\[/tex]
PV $7,633.6663
