Question

Calculate the monthly payment on a $220,000 mortgage if payment is made at the beginning of each month, and the annual interest rate is 3.75 percent for 20 years.

Group of answer choices

$1,304.35

$1,300.29

$1,319.25

$1,355.65

Answer 1

Monthly payment	=	P * R / [ 1- (1+R)^-N ] * (1+R)]
Using the formula:
Principle	P	220,000
Rate of interest per period:
Annual rate of interest		3.750%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.0375 /12 =	0.313%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	20
Total number of payments	N	20*12 =	240
Period payment using the formula	=	220000*0.00313/ [1- (1+0.00313)^ -240] * (1+0.00313)
Monthly payment	=	1,300.29

Answer is $1,300.29

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