Question

Your parents purchase a mobile home for $84,505.00 and secure it to the ground. If they have an excellent credit rating and using the table, how much is the interest at the end of the first month?


Mortgage

Secured

Mortgage

Unsecured

Auto

Secured

Auto

Unsecured

Credit

APR (%)

APR (%)

APR (%)

APR (%)

Excellent

3.75

4.50

5.30

6.45

Good

4.30

4.85

5.95

7.10

Average

5.15

5.70

6.50

7.90

Fair

6.50

7.00

7.15

8.45

Poor

8.25

9.30

8.40

9.95

(1 point)
Responses

$264.08
$264.08

$316.89
$316.89

$373.23
$373.23

$454.21

Answer 1

To calculate the interest at the end of the first month for a mobile home purchase of $84,505.00 with an excellent credit rating, we use the APR for a secured mortgage (3.75% from the table).

Here's how to do the calculation:

1. **Convert the APR to a monthly interest rate**:
\[
\text{Monthly interest rate} = \frac{\text{APR}}{12} = \frac{3.75\%}{12} = \frac{0.0375}{12} \approx 0.003125
\]

2. **Calculate the interest for the first month**:
\[
\text{Interest} = \text{Principal} \times \text{Monthly interest rate}
\]
\[
\text{Interest} = 84,505 \times 0.003125 \approx 264.08
\]

Therefore, the interest at the end of the first month is **$264.08**.