Question of the Week

Joe just bought a house for $750,000, of which 65% was financed with a 20 year, 8% mortgage. If the payments are to made on a yearly basis, how much will be the mortgage payment in Year 19?

A) $12,461
B) $34,874
C) $49,653
D) $34,612

Answer:

The correct answer is: c)

Step 1: Compute the amount of the mortgage

65% of 750,000 = 487,500

Step 2: Compute the annual mortgage payment with your calculator:

n = 20
i = 8%
PV = 487,500

Therefore, PMT = $49,653


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