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Natalie is applying to her friendly, neighborhood band for a mortgage of $500,000
Natalie is applying to her friendly, neighborhood band for a mortgage of $500,000. The bank is quoting 4% APR with semi-annual compounding, for a fixed rate mortgage. Natalie would like to have a 25-year amortization period and wants to make monthly payments. What will her monthly mortgage payments be?
a) $2639.18
b) $2612.43
c) $2650.24
d) $2888.05
e) $2630.10
Expert Solution
Computation of Monthly Mortgage Payments using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Monthly Mortgage Payments = ?
Rate = 4%/12 = 0.3333% compounded monthly
Nper = 25 years * 12 months = 300 months
PV = $500,000
FV = 0
Substituting the values in formula:
=pmt(0.3333%,300,-500000,0)
PMT or Monthly Mortgage Payments = $2,639.18
So, the correct option is A "$2,639.18".
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