Question

Suppose someone borrows $552,000 today to buy a house in Davis, CA. If the annual interest rate is 4%, with monthly compounding, what should be the fair value monthly mortgage payment?

Answer 1

Monthly Repayment on Loan = $2634.06

Step-by-step explanation:

given data

principal = $552,000

annual interest rate = 4% = 0.333% monthly

solution

for get here fair value monthly mortgage payment we consider here time period is 30 year = 360 months

so now we apply here Monthly Repayment on Loan formula that is

Monthly Repayment on Loan = principal ×
`(r(1+r)^t)/((1+r)^t -1)` .................1

put here value and we get

Monthly Repayment on Loan = 552000 ×
`(r(1+0.333)^(360))/((1+0.333)^(360) -1)`

Monthly Repayment on Loan = $2634.06