Jackson purchased a home with a 30-year, 6% compounded monthly mortgage loan for $375,000. How much will he pay the bank in the loan's first year?
A)$809,391
B)$26,980
C)$2,248
D)$434,391

Question

Jackson purchased a home with a 30-year, 6% compounded monthly mortgage loan for $375,000. How much will he pay the bank in the loan's first year?
A)​$809,391
B)​$26,980
C)​$2,248
D)​$434,391

Quizplus · Accepted Answer

First, we need to find the monthly payment on the mortgage loan using the formula:
P = (r * A) / (1 - (1 + r)^(-n))
where P is the monthly payment, r is the monthly interest rate (6% / 12 = 0.5%), A is the loan amount ($375,000), and n is the total number of monthly payments (30 years * 12 months = 360).
Plugging in the values, we get:
P = (0.005 * 375000) / (1 - (1.005)^(-360))
P = $2,247.60
So, Jackson will pay the bank $2,247.60 each month for 12 months in the first year, which amounts to:
12 * $2,247.60 = $26,971.20
Therefore, the best choice is B, as it represents the amount Jackson will pay the bank in the loan's first year.

Jackson Purchased a Home with a 30-Year, 6% Compounded Monthly