You have just taken out a 30-year, $120,000 mortgage on your new home.This mortgage is to be repaid in 360 equal of-month installments.If each of the monthly installments is $1,500, what is the effective annual interest rate on this mortgage?

Question

Quizplus · Accepted Answer

The effective annual interest rate can be calculated using the formula for the monthly payment of a fixed-rate mortgage. Given the monthly payment of $1,500, the principal of $120,000, and 360 payments, the effective annual interest rate is approximately 15.87%.

You Have Just Taken Out a 30-Year, $120,000 Mortgage on Your