Question

Teresa is considering purchasing a home for $220,000 by taking out a loan with an interest rate of 4.3% for 30 years. What would her monthly payment be?
Use the monthly payment formula to calculate the monthly payment for this loan:

M =
M = monthly payment

P = principal

r = interest rate

t = number of years



$896.25
$1,088.72
$1,868.70
$2,069.75

Answer 1

Answer:

$1,088.72

Explanation:

This is an annuities situation. The applicable formula is

M  = PV   ×      r        

                     1 − (1+r)−n

where p = $220,000

r = 4.3% interest rate per year,  Converted to monthly rate = 4.3/100 /12=0.00358

r = 30 year, which is 30 x 12 months= 360 months

M= $220,000  x 0.00358        

      1  - (1+0.00358 ) ^ - 360

M=$220,000 x   0.00358    

                            1- 0.2762

M = $220,000 x (0.00358 /0.7238)

M = $220,000 x 0.0049461

M = 1,088.12