On June 1, you borrowed $220,000 to buy a house. The mortgage rate is 8.25 percent. The loan is to be repaid In equal monthly payments over 15 years. The first payment is due on July 1. How much of the second payment applies to the principal balance? (Assume that each month is equal to 1/12 of a year.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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**Loan Repayment Calculation Example**

On June 1, you borrowed $220,000 to buy a house. The mortgage rate is 8.25 percent. The loan is to be repaid in equal monthly payments over 15 years. The first payment is due on July 1. How much of the second payment applies to the principal balance? (Assume that each month is equal to 1/12 of a year.)

**Explanation:**

To calculate how much of the second payment applies to the principal, you need to first determine the monthly payment using the loan amount, interest rate, and loan term. Then, calculate the interest portion of the second payment and subtract it from the total payment to find the principal portion.
Transcribed Image Text:**Loan Repayment Calculation Example** On June 1, you borrowed $220,000 to buy a house. The mortgage rate is 8.25 percent. The loan is to be repaid in equal monthly payments over 15 years. The first payment is due on July 1. How much of the second payment applies to the principal balance? (Assume that each month is equal to 1/12 of a year.) **Explanation:** To calculate how much of the second payment applies to the principal, you need to first determine the monthly payment using the loan amount, interest rate, and loan term. Then, calculate the interest portion of the second payment and subtract it from the total payment to find the principal portion.
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