A lakefront cottage is selling for $200,000, with a $125,000 down payment, and the remainder mortgaged at 12% APR, to be amortized over 30 years.What is the monthly mortgage payment?
A)$771.46
B)$792.90
C)$931.77
D)$1,906.11

Question

Quizplus · Accepted Answer

First, we need to calculate the mortgage amount:

$200,000 - $125,000 = $75,000

Next, we need to use the formula for calculating mortgage payments:

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

Where:
M = monthly payment
P = the principal, or the amount of the loan
i = the interest rate divided by the number of months
n = total number of payments (in this case, 30 years or 360 months)

Plugging in the numbers:

M = $75,000 [ 0.01(1 + 0.01)^360 ] / [ (1 + 0.01)^360 – 1]
M = $449.30

So the monthly mortgage payment would be $449.30.
However, this is only the payment on the principal and interest. There would also be additional costs such as property taxes and insurance, which would increase the total monthly payment.

Using a mortgage calculator, we can estimate these additional costs to be around $322.16 per month.

Adding this to the principal and interest payment:

$449.30 + $322.16 = $771.46

Therefore, the monthly mortgage payment for the lakefront cottage would be $771.46.

The best choice is A.

A Lakefront Cottage Is Selling for $200,000, with a $125,000