Question

On March 1, the horne mortgage balance was $318,000 for the home owned by Kim Morris. The interest rate for the loan is 7.75 percent. Assuming that Kim makes the March monthly mortgage payment of $2544, calculate the following: (a) The amount of interest included in the March payment (round your answer to the nearest cent). (b) The amount of the monthly mortgage payment that will be used to reduce the princapal balance. (c) The new balance after Kim makes this monthly mortgage payment. (a) Interest amount: (b) Principal reduction: (c) New balance:

Answer 1

The amount of interest included in the March payment is $2,052.37. The amount of the monthly mortgage payment that will be used to reduce the principal balance is $491.63. The new balance after Kim makes this monthly mortgage payment is $317,508.37.

Step-by-step explanation:

To calculate the amount of interest included in the March payment, we first need to calculate the monthly interest rate. We can do this by dividing the annual interest rate by 12. So, the monthly interest rate is 7.75% / 12 = 0.6458%. To calculate the interest amount, we multiply the monthly mortgage balance by the monthly interest rate. In this case, the interest amount is $318,000 * 0.6458% = $2,052.37.

To calculate the amount of the monthly mortgage payment that will be used to reduce the principal balance, we subtract the interest amount from the total monthly payment. In this case, the principal reduction amount is $2,544 - $2,052.37 = $491.63.

To calculate the new balance after Kim makes this monthly mortgage payment, we subtract the principal reduction amount from the previous balance. In this case, the new balance is $318,000 - $491.63 = $317,508.37.