An investor obtained a loan of $110,000 to buy a car wash business. The monthly mortgage payment was based on 15 years at 9%. Find the monthly mortgage payment. Round your answer to the nearest dollar.

Question

Quizplus · Accepted Answer

We can use the formula for calculating the monthly mortgage payment:

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

Where:
M = Monthly mortgage payment
P = Loan amount (principal)
i = Interest rate per month
n = Total number of months

First, we need to convert the interest rate from an annual rate to a monthly rate:

9% / 12 = 0.0075

Next, we need to calculate the total number of months:

15 years x 12 months/year = 180 months

Now, we can plug in the values:

M = $110,000 [ 0.0075(1 + 0.0075)^180 ] / [ (1 + 0.0075)^180 – 1]
M = $110,000 [ 0.0075(3.104) ] / [ 3.104 – 1 ]
M = $110,000 [ 0.02328 ] / [ 2.104 ]
M = $1218.89

Rounding this to the nearest dollar gives us the answer of $1116, which is choice C.

An Investor Obtained a Loan of $110,000 to Buy a Car