Explanation:
A fixed-rate mortgage is a mortgage loan that has a fixed interest rate for the entire term of the loan. Equal payments are made over the life of the mortgage.
PMT = Principal / [(1 - (1 + r)^(-n)) / r]
Where:
r = 0.055 / 12 = 0.004583 n = 10 × 12 = 120
PMT = 500,000 / [(1 - (1 + 0.004583)^(-120)) / 0.004583] = $5,426.21
On a financial calculator:
$5,426.21Q.3463 Consider the following residential mortgage:
$500,000If payments are made monthly, what is the amortized amount for the 10-year loan?
A
$5,520.00
B
$5,426.21
C
$5,225.50
D
$4,834.55
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