Question

Baggio just purchased a townhouse for $185000. He had a down payment of $12000 and his loan has a term of 30 years with a fixed APR of 4.92%. What will his monthly payment be?

Answer 1

$908.93

Explanation:

-The effective loan amount is :

`Loan \ Amount=185000-12000\\\\=173000`

#We calculate the effective monthly interest rate:

`r=(1+r_n)^t-1\\\\=(1+0.0492)^(1/12)-1\\\\=0.004010`

#Now we use the formula below to calculate the monthly payments:

`P=S[(r(1+r)^t)/((1+r)^t-1)]`, Where S is the loan amount and P the monthly payments.

Therefore:

`P=S[(r(1+r)^t)/((1+r)^t-1)]\\\\=173000[(0.004010(1+0.004010)^(360))/((1+0.0040)^(360)-1)]\\\\=908.93`

Hence, Baggio will make monthly payments of $908.93 each.