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?

$122,600.00

$123,632.15

$123,636.20

$122,654.30

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Verified Answer :

tbog tbog · Answer 1 · 2018-11-19T18:59:42-05:00

$123,632.15. Just took the test and this is the correct answer.

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eudora eudora · Answer 2 · 2019-03-13T08:24:40-04:00

Answer:

After second payment the principal balance at the beginning of the third month is $123,632.15

Step-by-step explanation:

Monthly Interest = Yearly Interest / 1200

Interest Paid = Previous Balance × Monthly Interest Rate

Equity = Monthly Payment - Interest Paid

New Balance = Previous Balance - Equity

Monthly Interest = 0.004125

After the FIRST payment

Interest Paid = 125,600.00 × 0.004125

Interest Paid = 518.10

Equity = 1,500.00 - 518.10

Equity = 981.90

New Balance = 125,600.00 -981.90

124,618.10

After the SECOND payment

Interest Paid = 124,618.10 × 0 .004125

Interest Paid = 514.05

Equity = 1,500.00 - 514.05

Equity = 985.95

New Balance = 124,618.10 -985.95 =

123,632.15

After second payment the principal balance at the beginning of the third month is $123,632.15