Consider the mortgage loan of $150,000 at a nominal 6% yearly interest applied monthly at a rate of .5% per month. Monthly payments of $1,000 are being made on this loan. Evaluate how much is owed after 1 month.
the interest is .005*150000 = $750
so, only $250 is subtracted from the principal.
I am also confused by this question. Please help me.
To calculate how much is owed after 1 month on a mortgage loan, we need to use the formula for the loan balance. The formula is:
Loan Balance = Principal + Accumulated Interest - Payments
Given:
Principal (P) = $150,000
Nominal Yearly Interest Rate (r) = 6%
Monthly Interest Rate (i) = 0.5%
Let's calculate the amount of interest accumulated in 1 month. We can use the formula:
Accumulated Interest = Principal * Monthly Interest Rate
Accumulated Interest = $150,000 * 0.5% = $750
Next, we can calculate the amount that will be deducted from the loan balance due to the monthly payment of $1,000:
Payments = $1,000
Using the loan balance formula:
Loan Balance = Principal + Accumulated Interest - Payments
Loan Balance = $150,000 + $750 - $1,000
Finally, we can calculate the loan balance:
Loan Balance = $150,750 - $1,000 = $149,750
Therefore, after 1 month, the amount owed on the mortgage loan would be $149,750.