Erin borrows $125,000 for a home at 6% for 25years. Annual insurance and taxes on the property are $675 and $954, respectively. Find the total monthly payment
A. $1,619.50
B. $805
C. $135.75
D. $940.75
The formula of the present value of annuity ordinary is Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)] Pv present value 125000 PMT monthly payment? R interest rate 0.06 K 12 because the payment is monthly N time 25 years So we need to solve for pmt PMT=pv÷[(1-(1+r/k)^(-kn))÷(r/k)] PMT=125,000÷((1−(1+0.06÷12)^( −12×25))÷(0.06÷12)) =805.4 rounded to 805 this is the monthly payment of the loan Since you ask for total monthly payment including insurance and tax you get 805+(675÷12)+(954÷12) =940.75 I divide the amount of insurance and tax by 12 to get the monthly payment of insurance and tax
