In a certain balloon mortgage loan, the borrower pays the lender all of the principal and interest for the loan at the end of four years. What will be the payoff amount for a loan of $185,000 at 4% annual interest rate where the interest is compounded monthly?
A) $217,041.85
B) $217,041.70
C) $217,041.80
D) $217,041.65
E) $217,041.75

Question

Quizplus · Accepted Answer

The payoff amount is calculated using the formula for compound interest: A = P(1 + r/n)^(nt). Here, P = $185,000, r = 0.04, n = 12, and t = 4. Plugging in these values gives A = $185,000(1 + 0.04/12)^(12*4) = $217,041.75.

In a Certain Balloon Mortgage Loan, the Borrower Pays the Lender