Question

You’ve decided to buy a house that is valued at $1 million. You have $400,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $600,000 mortgage, and is offering a standard 30-year mortgage at a 12% fixed nominal interest rate (called the loan’s annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.)

Answer 1

$ $6,171.6756

Step-by-step explanation:

Amortization is a method of loan repayment where the the principal and interest on loan are repaid using a series of equal installment.

Mortgage payment per month = Loan amount/ Annuity factor

Annuity factor = (1 - (1+r)^(-n))/r

r- monthly interest rate =12%/12 = 1%

n = 30 × 12 = 360 months

Annuity = (1 - (1.01)^(-360) / 0.01 )

= 97.21833108

Monthly payment = 600,000/ 97.2183

$6,171.6756