Question

a $134,100 mortgage for 20 years for a new home is obtained at the rate of 6.8% compounded monthly. What is the monthly payment of this mortgage?

A) 960.73

B) 955.78

C) 1,039.68

D) 1,023.67

Answer 1

Ans. Option d

Mortgage amount, L = $134100

Mortgage tenure, n = 20 years = 240 months

Annual interest rate, i = 6.8%

=> Monthly interest rate, r = i/12 = 0.567% or 0.005667

For monthly equivalent payment (A), we will use the formula for present value of the equivalent periodic cash flows with mortgage as the present value of the cash flows.

L = A*[(1-1/(1+r)^n)/r]

=> A = $1023.67

Thus, monthly payment is $1023.67

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