Question

You’ve decided to buy a house that is valued at $1 million. You have $300,000 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 $700,000 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

$7200.2882

Step-by-step explanation:

Amount of Mortgage that you need to take is 1mil - 300k = $700,000

Using financial calculator, we have the following inputs:

PV = 700,000 (the amount of mortgage need to take)

I/Y = 1% (annual interest is 12% --> Monthly interest is 12%/12 = 1%)

n = 360 (30 years have 30x12 = 360 months)

FV = 0 (value of mortgage at end of 30th year is nil)

PMT = ? (Monthly mortgage payment - the missing value we need to find)

--> PMT = $7200.2882