Question

Jaclyn and Henry secured a $225,000 mortgage at 5% annual interest for 20 years. This results in a monthly payment of $1484.90 and the interest paid in month one is $937.50. Assume they only make the minimum payment each month. How much is the balance reduced in month one? What is the beginning balance for month two?

Answer 1

The answers for the 1st part is 547.40 and the answer for the 2nd part is 224,452.60

Answer 2

Answer:

$2422.4

$220155.2

Step-by-step explanation:

This question deals with simple interest.

How much the balance is reduced in month one is the sum of the monthly payment and the interest paid in month one. So:

1484.9 + 937.5 = $2422.4

The beginning balance for month two is the starting amount ($225000) subtracted by two times the sum of the monthly payment and the interest paid in month one. So:

225000 - 2(1484.9 + 937.5)

= 225000 - 2(2422.4)

= 225000 - 4844.8

= $220155.2