Question

You have a mortgage of $125,600.00 at a 4.95% APR. You make a payment of $1,500.00 each month. What is your principal balance at the beginning of the third month?
(1 point)
Responses

$122,600.00
$122,600.00

$123,632.15
$123,632.15

$123,636.20
$123,636.20

$122,654.30
$122,654.30

Answer 1

Monthly rate = 0.0495/12 = 0.004125.

After 1st month: interest = 125,600 × 0.004125 = 518.10
Balance = 125,600 + 518.10 − 1,500 = 124,618.10

After 2nd month: interest = 124,618.10 × 0.004125 = 514.05
Balance = 124,618.10 + 514.05 − 1,500 = 123,632.15

So the beginning balance of the 3rd month is $123,632.15.