Question

You've decided to buy a house that is valued at $1 million. You have $150,000 to use as a down payment on the house, and you take out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $850,000 and is offering you a standard 30-year mortgage with 8% fixed nominal interest rate (called the annual percentage rate, or APR). According to this proposal, what will be your monthly mortgage payment?

a. $6,237.
b. $8,420.
c. $9,667.
d. $7,796

Answer 1

a. $6,237.

Step-by-step explanation:

We use the PMT formula i.e shown in the attachment below:

Data provided in the question

Present value = $850,000

Future value = $0

Rate of interest = 8% ÷ 12 months = 0.66666%

NPER = 30 years × 12 months = 360 months

The formula is shown below:

= PMT(Rate;NPER;-PV;FV;type)

The present value come in negative

So, after solving this, the monthly mortgage payment is $6,237