A client has a first mortgage of $175,000 at 5.8% and a second mortgage of $25,000 at 6.7%. What is the average rate of mortgage that the client pays?
A) 5.9%
B) 6.3%
C) 6.5%
D) 6%
E) 6.2%

Question

Quizplus · Accepted Answer

The average rate can be calculated by finding the weighted average of the two mortgage rates. The total mortgage amount is $175,000 + $25,000 = $200,000. The first mortgage's share of the total is $175,000/$200,000 = 87.5%, and the second mortgage's share is $25,000/$200,000 = 12.5%. The weighted average rate is (87.5% * 5.8%) + (12.5% * 6.7%) = 5.8875%, which rounds to approximately 5.9%.

A Client Has a First Mortgage of $175,000 at 5