Question

Rich is buying a home for $244,800. He is making a 15% down payment and financing the rest with a 25-year loan a 5.25% interest

A. $1149.02

B. $1216.44

C. $1246.82

D. $1466.84

Answer 1

C is your answer

Answer 2

C. $1246.82

Explanation:

Using the factor shown in the table for a 25-year loan at 5.25%, the calculated payment is ...

5.992·(244.8·0.85) = 1246.82

The factor of 0.85 on the home price represents the effect of subtracting 15% from the price to get the loan value. Of course, the home price is the number of thousands, so is 244.8 thousand.

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If you do the calculation, rather than use a factor from a table, you get a mortgage payment value of $1246.91. This suggests that the numbers in the table need more significant digits for loan values this high.