Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda's monthly payment?

Question

Quizplus · Accepted Answer

To calculate Amanda's monthly payment, we need to use the formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:
M = monthly payment
P = the principal, which is the amount of the loan
i = the interest rate divided by the number of months
n = number of months (which is the loan term, in years, multiplied by 12)

First, we need to calculate the amount of the loan by subtracting the down payment from the purchase price:

Loan amount = $296,000 - 20% of $296,000 = $236,800

Next, we need to calculate the monthly interest rate, which is the annual interest rate divided by 12:

Monthly interest rate = 6% / 12 = 0.005

Finally, we need to calculate the number of months, which is the loan term of 30 years multiplied by 12:

Number of months = 30 years * 12 months/year = 360 months

Now we can substitute these values into the formula and solve for M:

M = $236,800 [ 0.005(1 + 0.005)^360 ] / [ (1 + 0.005)^360 – 1] = $1,420.80

Therefore, Amanda's monthly payment is $1,420.80. Answer choice D is correct.

Amanda Chin Purchased a Home for $296,000; She Put 20