Suppose you are buying your first condo for $239,000 and you will make a $48.000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 2.75% nominal interest rate, with the first payment due in one month. What will your monthly payments be? a. $838.52 b. $1040.14 c. $517.3 d. $779.74 e. $850.48

The monthly payment is computed as shown below:

Present value = Monthly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

r is computed as follows:

= 2.75% / 12 (Since the payments are on monthly basis, hence divided by 12)

= 0.229166667%

n is computed as follows:

= 30 year x 12 months (Since the payments are on monthly basis, hence multiplied by 12)

= 360

So, the monthly payments is computed as follows:

$ 239,000 - $ 48,000 = Monthly payment x [ (1 - 1 / (1 + 0.00229166667)³⁶⁰ ) / 0.00229166667 ]

$ 191,000 = Monthly payment x 244.9533113

Monthly payment = $ 191,000 / 244.9533113

Monthly payment = $ 779.74