Calculate the monthly payment due on a 30-year, fixed-rate, $80,000 mortgage if the quoted interest rate is 6%. Round your answer to the nearest cent.

Question

Quizplus · Accepted Answer

Use the formula:

monthly payment = (P * r) / (1 - (1+r)^(-n))

where P = principal (amount borrowed), r = monthly interest rate (quoted rate divided by 12), and n = total number of payments (30 years multiplied by 12 months).

Plugging in the values, we get:

monthly payment = (80,000 * 0.06/12) / (1 - (1+0.06/12)^(-30*12)) 
= $479.64

Therefore, the best choice is A. This can be solved using the formula for monthly payment on a mortgage:

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

Where:
M = monthly payment
P = principal (the amount borrowed)
i = monthly interest rate
n = number of months

Plugging in the values given, we get:

M = 80,000 [ 0.005(1 + 0.005)^360 ] / [ (1 + 0.005)^360 – 1]

M ≈ $479.64

Rounding to the nearest cent, the answer is A) $479.64.

Calculate the Monthly Payment Due on a 30-Year, Fixed-Rate, $80,000