A person who files bankruptcy ends up paying a 5% higher fixed interest rate on a 25-year home loan than a person who has not filed bankruptcy. The person that does not file bankruptcy pays a 7.5% interest rate. If the loan amount is $160,000, how much more does the person who filed bankruptcy pay in total interest on the home loan than the person who has not filed bankruptcy?

The bankruptcy filer’s rate is 7.5% + 5 percentage points = 12.5%. For each loan, use the fixed-rate mortgage payment formula with a $160,000 principal and 300 monthly payments (25 × 12), then subtract the principal from total payments to find total interest. The difference in total interest is $168,654.22, so the correct choice is $168,654.22.

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