A homeowner takes out a $250,000 mortgage for 30 years at an interest rate of 5.8 percent. What is the interest payment in the first month?

Question

Quizplus · Accepted Answer

To calculate the monthly interest payment, we first need to find the monthly interest rate. We can do this by dividing the annual interest rate by 12.

Monthly interest rate = 5.8% / 12 = 0.00483

Next, we can use the following formula to calculate the monthly interest payment:

Monthly interest payment = (Outstanding loan balance x Monthly interest rate)

To find the outstanding loan balance, we need to know the total number of payments over the life of the loan. For a 30-year mortgage with monthly payments, this will be 30 years x 12 months = 360 payments.

Using an online mortgage calculator or spreadsheet program, we can calculate the outstanding loan balance after the first payment. Assuming the loan is fully amortizing, meaning the payments are enough to pay off both principal and interest over the life of the loan, the outstanding loan balance after the first payment is $249,878.98.

Plugging in the numbers, we get:

Monthly interest payment = ($249,878.98 x 0.00483) = $1,208.33

So the answer is B, $1,208.33.

A Homeowner Takes Out a $250,000 Mortgage for 30 Years