Question

Alex took out a 7/1 variable-rate mortgage for $140,000. The interest rate for

the first period was fixed at 5.25%, and the loan was amortized over 30 years.

At the end of the initial loan period, the interest rate was 6.75%, plus a 1.5%

margin. What was Alex's monthly mortgage payment during the initial fixed-

rate period?


A. $809.54

B. $739.09

C. $805.34

D. $773.09

Answer 1

Answer:

D). $773.09

Explanation:

Alex's monthly payment of the mortgage in the course of the initial fixed-rate period would be $773.09.

Mortgage amount = $140,000

Initial period of the mortgage = 7 years

Total time period = 30 years

Interest rate = 5.25%

Monthly mortgage payment for Alex = P * r $(1 + r )^{n}$/$(1 + r) ^{n}$ - 1

= $773.09