The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $150,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 3.5%/year compounded monthly, payable over a 30-year period in 360 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 3.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments.
(a) Find the monthly payment required to amortize each of these loans over the life of the loan.
1. option A $
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2. option B $
(b) How much interest would the Martinezes save if they chose the 12-year mortgage instead of the 30-year mortgage?