Question

You have contracted to buy a house for​ $250,000, paying​ $30,000 down and taking out a fully amortizing loan for the​ balance, at a​ 5.7% annual rate for 30 years. What will your monthly payment be if they make equal monthly installments over the next 30 years​ (to the nearest​ dollar)?

What will your monthly payment be if they make equal monthly installments over the next 30 years (to the nearest dollar)?

A). $1,189
B). $1,123
C). $1,035
D). $1,277

Answer 1

The correct answer is option D.

Step-by-step explanation:

The cost of the house is $250,000.

The down payment amount is $30,000.

The remaining amount is $(250,000-$30,000)=$220,000.

The monthly rate is 5.7/12= 0.475

Number of periods=12*30=360

The present value is $220,000.

Present value = Annuity * [1 - 1 / (1 + r)n] / r

220,000 = Annuity * [1 - 1 / (1 + 0.00475)360] / 0.00475

220,000 = Annuity * [1 - 0.1816] / 0.00475

220,000 = Annuity * 172.294842

Annuity = $1,277