Question

You have just taken out a 26 -year, $ 184 ,000 mortgage loan at an annual interest rate of 5.3 percent. The mortgage has monthly payments. What is the amount of each payment? Calculate your answer to the nearest $.01. Enter your answer as a positive number.

Answer 1

The monthly payment is computed as shown below:

Present value = Monthly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

r is computed as follows:

= 5.3% / 12 (Since the payments are monthly, hence divided by 12)

= 0.441666667% or 0.00441666667

n is computed as follows:

= 26 x 12 (Since the payments are monthly, hence multiplied by 12)

= 312

So, the monthly payment will be computed as follows:

$ 184,000 = Monthly payment x [ (1 - 1 / (1 + 0.00441666667)³¹² ) / 0.00441666667]

Monthly payment = $ 1,087.69 Approximately

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