You are considering purchasing a new home. You will need to borrow $ 200 comma 000 to purchase the home. A mortgage company offers you a 20 -year fixed rate mortgage (240 months) at 12 % APR (1 % month). If you borrow the money from this mortgage company, your monthly mortgage payment will be closest to:

Monthly installment = $2,202.17

Explanation:

Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.

The monthly installment is computed as follows:

Monthly installment = Loan amount/annuity factor

Loan amount = 200,000

Annuity factor = (1 - (1+r) ^ (-n)) / r

r - monthly rate of interest, n - number of months

r = 1% = 0.01, n = 20 * 12 = 240

Annuity factor = (1 - 1.01^ (-240)) / 0.01 = 90.81941635

Monthly installment = 200,000/90.819 = 2,202.172

Monthly installment = $2,202.17