You have decided to buy a new home and the bank offers you a 10 year fixed loan at 5.0% on a balance of $275,325. Determine the monthly payments.

a. $2,921.20 c. $1,460.60

b. $137,500 d. $243.43

Rate = 5 / 1,200 = 0.0041666667

Monthly payment = (rate + (rate / [ (1+rate) ^months - 1])) * principal

Monthly payment = 0.0041666667 + (0.0041666667 / ((1.0041666667^120) - 1) * principal

Monthly payment = 0.0041666667 + (0.0041666667 / 0.6470094977) * principal

Monthly payment = (0.0041666667 + 0.0064398849) * 275,325

Monthly payment = 0.0106065515 * 275,325

Monthly payment = 2,920.2 5