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Candy Kane has taken out a $250,000 mortgage at a quoted rate of 6.3% compounded semi-annually....

Candy Kane has taken out a $250,000 mortgage at a quoted rate of 6.3% compounded semi-annually. If the mortgage requires monthly payments over a term of 20 years, with each payment made at the end of the period, what is the required monthly payment?

  1. $1,834.61
  2. $1,813.39
  3. $1,822.79
  4. $1,850.26
  5. $1,825.03
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Homework Answers

Answer #1

Since the given rate is compounded semiannually and the payments are monthly, we need to find the monthly rate.

Where,
i = monthly rate
r = nominal rate.

Therefore,

Now, we can use the present value of the annuity formula to find the monthly payment.

Where,
PVA = Present value of annuity
A = Annuity or payment
i = Monthly interest rate in decimal form
n = Number of payments (20*12 = 240)

Therefore,

Therefore, the answer is C. $1,822.79

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