Question

your parents are purchasing a mobile home for $89,000. The sales tax is 4.2%, they make a $3,000 down payment and have an excellent credit score so they get a nice 4.25% interest rate. How much is the interest at the end of the second month if their first month payment is $925.67

Answer 1

Step 1 — loan principal
- Sales tax = 4.2% of $89,000 = $3,738
- Amount financed = 89,000 + 3,738 − 3,000 = $89,738

Step 2 — monthly interest rate
- Annual rate 4.25% → monthly rate r = 0.0425/12 = 0.0035416666667

Step 3 — first month
- Interest month 1 = 89,738 × r = $317.82 (≈ $317.8221)
- Principal paid month 1 = payment − interest = 925.67 − 317.8221 = $607.85 (≈ $607.8479)
- Balance after month 1 = 89,738 − 607.8479 = $89,130.15

Step 4 — second month interest
- Interest month 2 = 89,130.15 × r = $315.67 (≈ $315.6693)

Answer: The interest charged in the second month is about $315.67.