Question

John's parents purchased their first home in the 1980s with a 30-year

mortgage at 17.5%. Their home was purchased for $125,000. What was their
monthly mortgage payment?
A. $1832.91
B. $1872.90
C. $1965.72
D. $1765.92

Answer 1

Option A,$ 1,832.91 is correct

Explanation:

The monthly payment can be computed using the below pmt formula i excel shown below:

=pmt(rate,nper,-pv,fv)

rate is the monthly rate on the mortgage which is 17.5%/12=0.014583333

nper is the number of months of payment i.e 30*12=360

pv is the amount of the loan which is $125,000

fv is the total amount of repayment which is unknown

=pmt(0.014583333 ,360,-125000,0)=$ 1,832.91

The correct option is A,$ 1,832.91 which is the amount of money they need to pay back on the mortgage for 360 months