Question

a bank is offering a 30-year mortgage with an APR of 6.20% based on monthly compounding. if you plan to borrow 170,000$ , what will be your monthly payment ?

Answer 1

Answer :- Monthly Payment = $1041.24

Calculation :-

Monthly interest rate (r) = 6.20/ 12 = 0.5167% per month

Loan term (n) = 30 * 12 = 360

loan amount (P) = 170,000

Now we will have to calculate Monthly Payment (M)

M = P * { [ r ( 1 + r )n ] / [ ( 1 + r )n - 1 ] }

= 170,000 * { [ 0.005167 ( 1 + 0.005167)360 ] / [ ( 1 + 0.005167 )360 - 1 ] }

= 170,000 * { [ 0.005167 ( 1.005167 )360 ] / [ ( 1.005167 )360 - 1] }

= 170,000 * { [ 0.005167 ( 6.3938 ) ] / [ 6.3938 - 1 ] }

= 170,000 * { [ 0.0330368 ] / [ 5.3938 ] }

= 170,000 * { 0.0330368 / 5.3938 }

= 170,000 * 0.006124958

= $ 1041.24