Use the information for the question(s)below.
You are purchasing a new home and need to borrow $250,000 from a mortgage lender.The mortgage lender quotes you a rate of 6.25% APR for a 30-year fixed rate mortgage.The mortgage lender also tells you that if you are willing to pay 2 points,they can offer you a lower rate of 6.0% APR for a 30-year fixed rate mortgage.One point is equal to 1% of the loan value.So if you take the lower rate and pay the points you will need to borrow an additional $5000 to cover points you are paying the lender.
-Assuming you don't pay the points and borrow from the mortgage lender at 6.25%,then your monthly mortgage payment (with payments made at the end of the month)will be closest to:
A)$694.
B)$708.
C)$1540.
D)$1600.

Question

Quizplus · Accepted Answer

To calculate the monthly mortgage payment, we can use the formula: 
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] 
where M is the monthly payment, P is the principal (loan amount), i is the monthly interest rate (6.25%/12 = 0.005208), and n is the number of payments (30 years * 12 months = 360).

Thus,

M = 250000 [ 0.005208(1 + 0.005208)^360 ] / [ (1 + 0.005208)^360 – 1] 
M ≈ $1,539.99

Therefore, the closest answer is C, $1,540.

Use the Information for the Question(s)below