Calculate the monthly payment on a $200,000 mortgage if payment is made at the beginning of each month and the annual interest rate is 4.25 percent for 15 years.
A)$1,504.56
B)$1,111
C)$1,400.25
D)$13,714.22

Question

Quizplus · Accepted Answer

To calculate the monthly payment, we need to use the formula for the present value of an annuity. The present value of an annuity formula is:

PMT x (1 - (1 + r/n)^(-nt)) / (r/n)

Where:
PMT = the monthly payment
r = the annual interest rate
n = the number of times interest is compounded per year
t = the number of years

In this case, we have:
PMT = unknown
r = 4.25%
n = 12 (since payments are made monthly)
t = 15

Plugging in the numbers:
PMT x (1 - (1 + 0.0425/12)^(-12*15)) / (0.0425/12) = $1,504.56

Therefore, the monthly payment is $1,504.56, which is answer choice A.

Calculate the Monthly Payment on a $200,000 Mortgage If Payment