Question

Kate and Bill secured a loan with a 75% loan-to-value ratio. The interest rate was 7.125% and the term was for 30 years. The first month's interest payment was $477.82. What was the appraised value of the property?a) $103,700b) $80,475c) $107,300d) $79,239

Answer 1

Answer: Option c.

Explanation:

We know that the first month's interest payment was $477.82, therefore, we can calculate the Annual interest multiplying this first month's interest payment by 12:

`Annual\ interest=\$477.82*12\\\\Annual\ interest=\$5,733.84`

Dividing it by the interest rate (Remember that
`7.125\%=(7.125\%)/(100)=0.07125`), we get:

`(\$5,733.84)/(0.07125)=\$80,474.94`

Finally, since Kate and Bill secured a loan with a 75% loan-to-value ratio, we get:

`(\$80,474.94)/(0.75)=\$107,299.92 \approx\$107,300`