Question

Monica has decided to move out of her apartment above Central Perk and is buying a condo for $180,000. She is planning on making a $15,000 down payment. She arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6.5% nominal interest rate, with the first payment due in one month. What will her monthly payments be?

A). $792.61

B). $886.48

C). $1,251.19

D). $855.19

E). $1,042.91

Answer 1

Loan amount = Present value of future monthly payments = monthly payment * [1-(1+i)^-n]/i

i = interest rate per period

n = number of periods

=>

monthly payment * [1-(1+0.065/12)^-360]/(0.065/12) = 180000 - 15000

=>

monthly payment = 1042.91

hence choose E)