Question

The buyer has been approved for a new 30-year, 95% loan at 7.5% interest. The closing is August 30 with the first payment of $1,018.72 due October 1. Interest is paid in arrears. How many days of interest is due on the buyer's new loan at closing?

1. 32
2. 29
3. 2
4. 31

Answer 1

The number of days of interest due on the new loan at closing is 31 days, calculated by totaling the days from August 30 to September 30, the day before the first payment is due.

Step-by-step explanation:

The question is asking to calculate the number of days of interest that will be due on the buyer's new loan at closing, given that the closing is on August 30 and the first payment is due on October 1. Since interest is paid in arrears, we need to count the number of days from the closing date (August 30) until the day before the first payment date (September 30). August has 31 days, so there is 1 day in August, and since September has 30 days, we add all 30 days. Therefore, the total number of days of interest due at closing is 31 days.