Question

Raquel obtained a 30-year, $185,000 mortgage at an annual interest rate of 3.6%, compounded monthly, to purchase her new home. Calculate her monthly payment on the loan.

a) $850
b) $875
c) $900
d) $925

Answer 1

To calculate the monthly payment on a mortgage, use the formula Monthly Payment = Loan Amount * (r*(1+r)^n)/((1+r)^n-1). Plugging in the values, the monthly payment on Raquel's mortgage is approximately $840.17.

Step-by-step explanation:

To calculate the monthly payment on a mortgage, we can use the formula:

Monthly Payment = Loan Amount * (r*(1+r)^n)/((1+r)^n-1),

Where:

• Loan Amount is $185,000
• r is the monthly interest rate, which is (annual interest rate/12) expressed as a decimal. r = 0.036/12 = 0.003
• n is the total number of monthly payments, which is 30 years * 12 = 360

Plugging in the values:

Monthly Payment = 185000 * (0.003*(1+0.003)^360)/((1+0.003)^360-1)

Using a calculator, the monthly payment comes out to be approximately $840.17.