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Answer the following questions that are related to your purchase of your first home for $500,000....

Answer the following questions that are related to your purchase of your first home for $500,000.

You have just purchased the house and have put a 20% down payment, and will borrow the remaining amount. The 15-year fixed rate loan has an Annual Percentage Rate (APR) of 3.75%. You will make monthly payments for the life of the loan.

Q1: Your effective interest rate is closest to which of the following?

a. 3.815%

b. 3.687%

c. 3.880%

d. 3.750%

Q2. How much is your monthly payment?

a. More than $2,500

b. $1,000 to $1,500

c. $2,000 to $2,500

d. Less than $1,000

e. $1,500 to $2,000

Q3. Assume that you make payments for one year. How much have you reduced the “principal balance” – that is, the amount that you owe on the loan?

a. Less than $5,000

b. $10,000 to $15,000

c. More than $20,000

d. $15,000 to $20,000

e. $5,000 to $10,000

Q4. After one year, how much have you paid in interest?

a. $10,000 to $15,000

b. $5,000 to $10,000

c. $15,000 to $20,000

d. More than $20,000

e. Less than $5,000

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