Suppose you have taken out a $400,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 3.75%. In month 1 of the mortgage, how much of the monthly mortgage payment does the interest portion consist of?
A) $9.09
B) $1,250.00
C) $1658.89
D) $2,908.89

Question

Quizplus · Accepted Answer

The interest portion of the first month's payment can be calculated using the formula for monthly interest on a mortgage: Principal amount * (annual interest rate / 12). For a $400,000 loan at 3.75% annual interest, this is $400,000 * (0.0375 / 12) = $1,250.

Suppose You Have Taken Out a $400,000 Fully-Amortizing Fixed Rate