Anderson bought a $210,000.00 house, paying 10% down, and financing the rest at 7% interest for 30 years.A. What is the monthly payment?Anderson has a payment of $ a month.
Solution
To calculate the monthly payment, we first need to determine the amount that Anderson financed. He paid 10% down on a 21,000.00. So, he financed 21,000.00 = $189,000.00.
Next, we need to convert the annual interest rate to a monthly rate. 7% per year is 7/12 = 0.00583 per month.
Then, we use the formula for the monthly payment on a loan, which is:
P = [r*PV] / [1 - (1 + r)^-n]
where: P is the monthly payment r is the monthly interest rate PV is the present value or principal amount of the loan n is the number of payments
Substituting the values we have:
P = [0.00583 * $189,000.00] / [1 - (1 + 0.00583)^-360]
Calculating the above expression gives us a monthly payment of approximately 1,260.00 a month.
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