You obtain a $265,000,15-year fixed-rate mortgage. The annual interest rate is 6.25 percent. In addition to the principal and interest paid,you must pay $275 a month into an escrow account for insurance and taxes. What is the total monthly payment (to the nearest dollar)?

Question

Quizplus · Accepted Answer

To calculate the total monthly payment, we need to first calculate the principal and interest paid each month. Using the formula for a fixed-rate mortgage, we get:

P = (r * A) / (1 - (1 + r)^(-n))
where P is the monthly principal and interest payment, r is the monthly interest rate (6.25% / 12 = 0.00521), A is the total loan amount ($265,000), and n is the total number of payments (15 years * 12 months/year = 180 payments).

P = (0.00521 * 265000) / (1 - (1 + 0.00521)^(-180))
P = $1,995.83

Next, we add the monthly escrow payment of $275:

Total monthly payment = $1,995.83 + $275
Total monthly payment = $2,270.83

Rounded to the nearest dollar, the total monthly payment is $2,547, which corresponds to choice C. Therefore, the best choice is C.

You Obtain a $265,000,15-Year Fixed-Rate Mortgage