Question

Erin borrows $125,000 for a home at 6% for 25years. Annual insurance and taxes on the property are $675 and $954, respectively. Find the total monthly payment

A. $1,619.50
B. $805
C. $135.75
D. $940.75

Answer 1

The formula of the present value of annuity ordinary is
Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)]
Pv present value 125000
PMT monthly payment?
R interest rate 0.06
K 12 because the payment is monthly
N time 25 years
So we need to solve for pmt
PMT=pv÷[(1-(1+r/k)^(-kn))÷(r/k)]
PMT=125,000÷((1−(1+0.06÷12)^(
−12×25))÷(0.06÷12))
=805.4 rounded to 805 this is the monthly payment of the loan
Since you ask for total monthly payment including insurance and tax you get
805+(675÷12)+(954÷12)
=940.75
I divide the amount of insurance and tax by 12 to get the monthly payment of insurance and tax

Hope it helps