Maria Hernandez purchased a home for $100,000 and made a down payment of $30,000. The balance was financed for 25 years at an annual interest rate of 8%. Find the monthly mortgage payment.

Question

Quizplus · Accepted Answer

First, we need to calculate the balance that was financed:
Balance = $100,000 - $30,000 = $70,000

Next, we can use the formula for a mortgage payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:
M = monthly mortgage payment
P = the principal, which is the amount of the mortgage
i = the annual interest rate divided by 12 (to get the monthly rate)
n = number of payments (in this case, 25 years * 12 months = 300)

Plugging in our values:
M = $70,000 [ 0.08/12 (1 + 0.08/12)^300 ] / [ (1 + 0.08/12)^300 – 1]
M ≈ $540.27

Therefore, the answer is choice C, $540.27.

Maria Hernandez Purchased a Home for $100,000 and Made a Down