Question

Derrick wants to buy a new house that costs 100,000, he plans to finance it with monthly payments over 9 years.

Interest: 6% (annual)

What will be the monthly interest payment be once the first month has been paid?

Answer #1

PV = 100,000

n = 9 * 12 = 108

r = 6%/12 = 0.005

First, we will find the monthly payment

The monthly interest payment once the first payment is made = Loan outstanding after the first payment * monthly interest rate

Loan outstanding = PV with n = 107 payments remaining

Loan outstanding after the first payment = 99,299.4250341117

Monthly interest payment = 99,299.4250341117 * 0.005

Monthly interest payment = $496.4971251706

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