Question

1. Johnson Company just acquire a building for $200,000 through financing from Bank of America at a 5% annual interest rate, with 20 years to maturity of the loan. What would be Johnson Company's monthly mortgage payment? (Round your answer to the nearest whole dollar.)

Answer 1

To calculate Johnson Company's monthly mortgage payment, you can use the formula for calculating the monthly payment on a loan. By plugging in the values of the principal amount, monthly interest rate, and total number of monthly payments into the formula, you can determine the monthly payment. In this case, the monthly payment for Johnson Company would be approximately $1,316.

Step-by-step explanation:

To calculate the monthly mortgage payment for Johnson Company, we can use the formula for calculating the monthly payment on a loan. The formula is:

Monthly Payment = P * r * (1 + r)^n / [(1 + r)^n - 1]

Where:

P = Principal amount of the loan (in this case, $200,000)

r = Monthly interest rate (5% divided by 100 and then divided by 12)

n = Total number of monthly payments (20 years multiplied by 12 months)

Plugging in the values:

Principal amount (P) = $200,000

Monthly interest rate (r) = 0.05 / 100 / 12 = 0.0041667

Total number of monthly payments (n) = 20 * 12 = 240

Using these values in the formula:

Monthly Payment = $200,000 * 0.0041667 * (1 + 0.0041667)^240 / [(1 + 0.0041667)^240 - 1]

Calculating the result gives us:

Monthly Payment ≈ $1,316

So, Johnson Company's monthly mortgage payment would be approximately $1,316.