John House has taken a $250,000 mortgage on his house at an interest rate of 6% per year. If the mortgage calls for twenty equal annual payments, what is the amount of each payment?
A) $21,796.14
B) $10,500.00
C) $16,882.43
D) None of the above

Question

Quizplus · Accepted Answer

The annual payment can be calculated using the formula for an annuity: P = [r*PV] / [1 - (1 + r)^-n], where P is the payment, r is the annual interest rate (0.06), PV is the present value ($250,000), and n is the number of payments (20). Plugging in the values, the payment is approximately $21,796.14.

John House Has Taken a $250,000 Mortgage on His House