Alma is considering buying her first home. The house she is interested in buying is priced at $150,000. Alma can put down a $20,000 payment, and she qualifies for a 30-year mortgage at 5%. What will her monthly mortgage payment be?
A) $697.87
B) $702.34
C) 805.23
D) $777.12

APEX - $697.87

Answer:

The formula for the present value of an annuity payment, that is,

if you make n payments at interest rate i what will be the value of the

annuity after n payments. The formula assumes a monthly payment of 1.

A = (1 - (1 + i)^-n) / i   or what will the 1 payment be worth after n periods.

i = .05 / 12    the monthly interest rate

n = 360    the number of monthly payments

A = (1 - (1 + (.05/12))^-360) / (.05 / 12) =  186.28

Since each monthly payment of $1 = 186.28 after 30 years

what must be the monthly payment to have $130,000 in 30 years?

Payment = 130,000 / 186.28 = 697.87