Solve the problem. If necessary, use the table of monthly payments below. Round your answer to the nearest cent.
Monthly Payments to Repay Principal and Interest on a $1000 Mortgage
-Find the monthly payment needed to amortize principal and interest for the following fixed-rate mortgage.
Mortgage amount: $193,000
Term of mortgage: 10 years
Interest rate: 9%

Question

Solve the problem. If necessary, use the table of monthly payments below. Round your answer to the nearest cent.
Monthly Payments to Repay Principal and Interest on a $1000 Mortgage 
-Find the monthly payment needed to amortize principal and interest for the following fixed-rate mortgage.
Mortgage amount: $193,000
Term of mortgage: 10 years
Interest rate: 9%

Quizplus · Accepted Answer

To find the monthly payment needed to amortize a fixed-rate mortgage, you can use the formula for the monthly payment on an installment loan: M = P[r(1+r)^n]/[(1+r)^n - 1], where M is the monthly payment, P is the principal amount (the initial loan balance), r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments (loan term in years multiplied by 12). For this mortgage, P = $193,000, the annual interest rate is 9% (so the monthly interest rate r = 0.09/12 = 0.0075), and the term is 10 years (so n = 10*12 = 120 months). Plugging these values into the formula gives M = $193,000[0.0075(1+0.0075)^120]/[(1+0.0075)^120 - 1], which calculates to approximately $2444.84.

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