RatedrillMonthly mortgage payment
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
You buy a home for $155,000 and put 5% down. The rest is a 30-year fixed mortgage at 8% APR with monthly payments. What is the monthly payment of principal and interest?
What this problem teaches
The formula: PMT = L × i / (1 - (1 + i)^-n). Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive. The loan is cash you receive, so PV is positive and the payment comes out negative.
A hint if you get stuck
Loan = price - down payment. Then PMT = L × i / (1 - (1 + i)^-n), with i = APR / 12 and n = 12 × years.
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