You take out a sub-prime mortgage for $280,885, maturing in 30 years, and charging 1% monthly....

You take out a sub-prime mortgage for $280,885, maturing in 30 years, and charging 1% monthly. What is the monthly mortgage payment? (There are 360 monthly payments.)

Expert Solution

The monthly payments are computed as follows:

Present value = Monthly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

$ 280,885 = Monthly payment x [ (1 - 1 / (1 + 0.01)³⁶⁰ ) / 0.01 ]

$ 280,885 = Monthly payment x 97.21833108

Monthly payment = $ 280,885 / 97.21833108

Monthly payment = $ 2,889.22 Approximately

Feel free to ask in case of any query relating to this question

jeff jeffy answered 2 years ago

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You take out a sub-prime mortgage for $280,885, maturing in 30 years, and charging 1% monthly....

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