Final answer:
To calculate the monthly mortgage payment, use the formula M = P [ i(1+i)^n ] / [ (1+i)^n - 1 ]. Substituting the given values, the monthly mortgage payment is approximately $460.77.
Step-by-step explanation:
To calculate the monthly mortgage payment, we'll use the formula:
M = P [ i(1+i)^n ] / [ (1+i)^n - 1 ]
Where:
M = Monthly mortgage payment
P = Purchase price of home - Down payment
i = Monthly interest rate
n = Total number of monthly payments
In this case, the purchase price of home ($74,800) minus the down payment ($0) is used as the principal amount. The monthly interest rate is calculated by dividing the annual interest rate (6.25%) by 12, and the total number of monthly payments is 20 years multiplied by 12 months.
Let's substitute the values into the formula:
M = $74,800 [ (0.0625/12)(1+(0.0625/12))^240 ] / [ (1+(0.0625/12))^240 - 1 ]
After calculating the above expression, we get M ≈ $460.77.