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Tom wishes to purchase a property that has been valued at $300,000. He has $30,000 available as a deposit, and will require a mortgage for the remaining amount. The bank offers him a 25-year mortgage at 2% interest, compounded monthly. Calculate the total interest paid on the mortgage. Round your answer to the nearest dollar.

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  1. 14 May, 16:30
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    Answer: The total interest paid on the mortgage is $179550

    Step-by-step explanation:

    The initial cost of the property is $300000. If he deposits $30000, the remaining amount would be

    300000 - 30000 = $270000

    Since the remaining amount was compounded, we would apply the formula for determining compound interest which is expressed as

    A = P (1+r/n) ^nt

    Where

    A = total amount in the account at the end of t years

    r represents the interest rate.

    n represents the periodic interval at which it was compounded.

    P represents the principal or initial amount deposited

    From the information given,

    P = 270000

    r = 2% = 2/100 = 0.02

    n = 12 because it was compounded 12 times in a year.

    t = 25 years

    Therefore,

    A = 270000 (1+0.02/12) ^12 * 25

    A = 270000 (1+0.0017) ^300

    A = 270000 (1.0017) ^300

    A = $449550

    The total interest paid on the mortgage is

    449550 - 270000 = $179550
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