(a) The amount of interest included in the February payment (round your answer to the nearest cent). (b) The amount of the monthly mortgage payment that will be used to reduce the principal balance. (c) The new balance after Kevin makes this monthly mortgage payment.
(a) The amount of interest included in the February payment (round your answer to the nearest cent). (b) The amount of the monthly mortgage payment that will be used to reduce the principal balance. (c) The new balance after Kevin makes this monthly mortgage payment.
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
Section: Chapter Questions
Problem 1PS
Related questions
Question
![**Mortgage Payment Calculations for February**
**Scenario:**
On February 1, the home mortgage balance was $80,000 for the home owned by Kevin Perez. The interest rate for the loan is 9 percent.
Assuming that Kevin makes the February monthly mortgage payment of $800, calculate the following:
a) The amount of interest included in the February payment (round your answer to the nearest cent).
b) The amount of the monthly mortgage payment that will be used to reduce the principal balance.
c) The new balance after Kevin makes this monthly mortgage payment.
**Input Fields for Calculations:**
- (a) Interest amount: $ [Text Box]
- (b) Principal reduction: $ [Text Box]
- (c) New balance: $ [Text Box]
**Explanation:**
To calculate the answers:
- **Interest Amount:**
- Formula: Interest for the month = Principal balance x Monthly interest rate
- Monthly interest rate is the annual rate divided by 12.
- Here, the annual interest rate is 9% (0.09 when converted to decimal), so the monthly interest rate is 0.09 / 12 = 0.0075.
- Interest for February = $80,000 x 0.0075 = $600.
- **Principal Reduction:**
- Amount reducing principal = Monthly payment - Interest amount
- Principal reduction for February = $800 - $600 = $200.
- **New Balance:**
- New mortgage balance = Previous balance - Principal reduction
- New balance after February payment = $80,000 - $200 = $79,800.
Enter these values in the respective text boxes for verification.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae063e21-e069-49f8-ad73-1d555b7f1041%2F136ac3bd-405a-4cb6-beea-ddf317de8c9a%2Fgw31m3e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Mortgage Payment Calculations for February**
**Scenario:**
On February 1, the home mortgage balance was $80,000 for the home owned by Kevin Perez. The interest rate for the loan is 9 percent.
Assuming that Kevin makes the February monthly mortgage payment of $800, calculate the following:
a) The amount of interest included in the February payment (round your answer to the nearest cent).
b) The amount of the monthly mortgage payment that will be used to reduce the principal balance.
c) The new balance after Kevin makes this monthly mortgage payment.
**Input Fields for Calculations:**
- (a) Interest amount: $ [Text Box]
- (b) Principal reduction: $ [Text Box]
- (c) New balance: $ [Text Box]
**Explanation:**
To calculate the answers:
- **Interest Amount:**
- Formula: Interest for the month = Principal balance x Monthly interest rate
- Monthly interest rate is the annual rate divided by 12.
- Here, the annual interest rate is 9% (0.09 when converted to decimal), so the monthly interest rate is 0.09 / 12 = 0.0075.
- Interest for February = $80,000 x 0.0075 = $600.
- **Principal Reduction:**
- Amount reducing principal = Monthly payment - Interest amount
- Principal reduction for February = $800 - $600 = $200.
- **New Balance:**
- New mortgage balance = Previous balance - Principal reduction
- New balance after February payment = $80,000 - $200 = $79,800.
Enter these values in the respective text boxes for verification.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education