You are going to buy a home for $500,000. you will finance 80% of the $500,000 with a thirty year fixed rate mortgage. if the annual interest rate on the mortgage is 4%, the first monthly interest payment will be $1,333.33 true false

TRUE

The cuota will be of 1,906.66 from which 1,333.33 are payment of interest.

Explanation:

We need to check if the mortgage cuota will be of 1,333.33

The formula for Cuota will be:

PV  500,000 x80% = $400,000.00

time  30 years x 12 month = 360

rate0.04 annual rate we divide by 12 to get the monthly rate. 0.03333

C1,909.66

The first monthly payment will be of 1,909.66

But this payment has bot, amortization on the principal and interest.

The interest expense for this payment will be:

carrying value x monthly rate

In this case, is the first payment so we are talking about the full mortgage.

400,000 x 0.003333 = 1,333.33

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