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A house is to be purchased for $480,000 with a 10 percent down payment. A conventional...

A house is to be purchased for $480,000 with a 10 percent down payment. A conventional 30-yr loan is used at 7.5 percent, resulting in monthly payments of $3,020.61 . The interest portion of the first monthly payment will be what?

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Answer #1

The rate of interest is 7.5 %. Convert it to a monthly effective rate of interest.

Calculating Nominal Rate of Interest


where
r=Effective Rate of Interest

r(p)=Nominal rate of interest compounded p- times a year

Therefore,

Calculating the monthly effective rate of interest

The monthly effective rate of interest is 0.6045 %.

==========

Loan after down payment =480000-480000*0.1=432000

interest amount in first installment =loan amount in the last payment * monthly effctive interest rate

=432000*0.00605

=2613.6

the interest portio is $2613.6

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