Question

You borrow $250,000 to buy a home. The terms of the loan are as follows: 30-year mortgage loan at a rate of 4.50 percent with monthly payments. What percentage of your first month's payment goes toward interest?

	A.	67 percent
	B.	43 percent
	C.	74 percent
	D.	89 percent
	E.	58 percent

Answer 1

	Monthly payment	[P×r×(1+r)^n]÷[(1+r)^n-1]
	Here,
1	Interest rate per annum	4.50%
2	Number of years	30
3	Number of compoundings per per annum	12
1÷3	Interest rate per period ( r)	0.38%
2×3	Number of periods (n)	360
	Loan amount (P)	$                                                                                            250,000
	Monthly payment	$                                                                                           1,266.71
		(250000×0.38%×(1+0.38%)^360)÷((1+0.38%)^360-1)

First month payment to interest:

= ($250,000*4.50%/12)/$1,266.71

= 74%

Hence, correct option is C. 74 percent