Question

RF Company signed a $250,000 mortgage on July 1, 2018 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,600 at the end of each month. The interest rate is 6.0% per year.  How much interest expense will be paid on August 31, 2018? (Round your answer to the nearest whole dollar.)

Answer 1

Total Amount borrowed = $ 250,000

Equal monthly payment (EMP) =$ 2,600 Per month

Interest Rate = 6% per year

For July 31,

Interest Expenses = Beginning Balance of Lona * interest Rate fot the Period

=250,000*6%*1/12 = $ 1,250

Redcution in Principal Amount = EMP - Interest Expesnes

=2,600 -$ 1,250 = $1,350

Loan Balance on July 31 = amount Borrowed - Reduction in Principal amount

= $ 250,000 -$ 1,350 = $ 248,650

On Aug 31 2018

Interest Expenses = Beginning Balance of loan * interset rate *1/12

= 248,650 *6%*1/12 = $ 1,243.25 (Answer )

Answer :

Interest Expenses Paid on Aug 31 = $ 1,243