A house costs $138,000.It is to be paid off in exactly ten years,with monthly payments of $1675.What is the quoted APR of this mortgage?

Question

Quizplus · Accepted Answer

Using a financial calculator or spreadsheet, we can solve for the APR that will result in monthly payments of $1675 for 10 years:

N = 10 years x 12 months/year = 120 months
PMT = -$1675 (since it's a payment)
PV = -$138,000 (since it's a loan)
FV = 0 (since we want to pay off the loan completely)
Solving for I/Y (which represents the APR) gives us 8.14%. Therefore, the quoted APR of this mortgage is 8.14%.

A House Costs $138,000