Lizzy Clar bought a home for $160,000, putting down $30,000. The rate of interest is 7% for 25 years. The total yearly mortgage payment is:
A)$11,029.20
B)$11,920.20
C)$919.10
D)$18,782.40
E)None of these

Question

Quizplus · Accepted Answer

First, we need to calculate the amount of the mortgage:
$160,000 - $30,000 = $130,000
Then, we use the formula for mortgage payments:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
where:
M = mortgage payment
P = principal, which is the amount of the mortgage
i = interest rate per year (divide the annual rate by 12 to get the monthly rate)
n = number of payments (multiply the number of years by 12 to get the number of monthly payments)
So, plugging in the numbers:
M = $130,000 [ 0.005833(1 + 0.005833)^300 ] / [ (1 + 0.005833)^300 – 1]
M = $11,029.20
Therefore, the total yearly mortgage payment is $11,029.20.

Lizzy Clar Bought a Home for $160,000, Putting Down $30,000