Question

On January 1, 2024, Stoops Entertainment purchases a building for $420,000, paying $120,000 down and borrowing the remaining $300,000, signing an 8%, 15-year mortgage. What is the monthly installment payment due at the end of each month?

a) $2,866.96
b) $3,500.00
c) $2,000.00
d) $4,200.00

Answer 1

The correct monthly installment payment on a $300,000 loan at an 8% annual interest rate over a 15-year period is $2,866.96, which is option a.

Step-by-step explanation:

The student is asking about the calculation of a monthly installment payment on a mortgage. To calculate the monthly payment of a $300,000 loan at an 8% annual interest rate, compounded monthly, over a 15-year period, we need to use the formula for an annuity. The formula for the monthly payment R on a mortgage is:

R = P [i (1+i)^n] / [(1+i)^n - 1]

Where:

• P is the principle amount ($300,000)
• i is the monthly interest rate (8%/12 = 0.0066667)
• n is the total number of payments (15 years * 12 months/year = 180 payments)

Using this formula, we can calculate the exact monthly installment payment that would be required.

Without showing detailed calculations here (which require a financial calculator or an amortization formula in a spreadsheet or financial software), we can find the closest option to the calculated result among the provided choices.

The correct answer is option a) $2,866.96.