Answer-first summary for fast verification
Answer: USD 167.92
Let's calculate step by step: **Step 1: Interest-only payments for first 5 years** - Monthly interest rate = 5%/12 = 0.41667% - Interest-only payment = $100,000 × 0.0041667 = $416.67 **Step 2: Remaining balance after 5 years** Since it's interest-only for first 5 years, principal remains $100,000 **Step 3: Self-amortizing mortgage for remaining 25 years** - Remaining term = 25 years × 12 = 300 months - Monthly payment for self-amortizing portion: PMT = P × [r(1+r)^n] / [(1+r)^n - 1] = $100,000 × [0.0041667(1.0041667)^300] / [(1.0041667)^300 - 1] = $100,000 × [0.0041667 × 3.48129] / [3.48129 - 1] = $100,000 × [0.014505] / [2.48129] = $100,000 × 0.0058459 = $584.59 **Step 4: Principal portion in 61st month** The 61st month is the first month of the self-amortizing period. - Total payment = $584.59 - Interest portion = $100,000 × 0.0041667 = $416.67 - Principal portion = $584.59 - $416.67 = $167.92 Therefore, the principal portion in the 61st month is $167.92.
Author: LeetQuiz Editorial Team
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Bennett Bank extends a 5% APR (annual percentage rate) USD 100,000 30-year mortgage requiring monthly payments. If the mortgage is structured so that it requires interest-only payments for the first 5 years, after which point it becomes a self-amortizing mortgage, what would be the portion of the monthly payment applied to the principal in the 61st month?
A
USD 167.92
B
USD 174.60
C
USD 584.59
D
USD 591.27
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