Question

Cynthia purchased a condo for $180,000. Her monthly payments are $900 a month, and the mortgage loan has an annual percentage rate of 4%. What part of Cynthia's first monthly payment is going to pay down the principal of her loan?

Question 3 options:

$300


$600


$900


$400

Answer 1

To determine how much of Cynthia's first monthly payment goes towards paying down the principal of her loan, we first need to calculate the interest on the loan for the first month and then subtract that from her total monthly payment.

1. Calculate the monthly interest rate:
\[
\text{Monthly Interest Rate} = \frac{\text{Annual Interest Rate}}{12} = \frac{4\%}{12} = \frac{0.04}{12} \approx 0.003333
\]

2. Calculate the interest for the first month on the loan amount:
\[
\text{Interest for the First Month} = \text{Loan Amount} \times \text{Monthly Interest Rate}
\]
\[
= 180,000 \times 0.003333 \approx 600
\]

3. Determine how much of Cynthia's first payment goes to the principal:
\[
\text{Principal Payment} = \text{Total Monthly Payment} - \text{Interest Payment}
\]
\[
= 900 - 600 = 300
\]

Therefore, the part of Cynthia's first monthly payment that goes towards paying down the principal of her loan is **$300**.

The correct answer is:
**$300**