Question

Dagny Taggart has just purchased a home and taken out a $300,000 mortgage. The mortgage has a 25 year term with monthly payments and has an APR of 6% (monthly compounding). The total amount of interest that Dagny will pay during the first month of her mortgage is closest to:

a.
1923.24

b.
1816.93

c.
1500

d.
1485

Answer 1

c.

1500

Explanation:

The computation of the total amount of interest in first month is shown below:

Interest for first month is

= Mortgage amount × interest rate ÷ total number of months in a year

= $300,000 × 6% ÷ 12

= $1,500

Hence, the interest in the first month is $1,500

Therefore the c option is correct