If you decide to borrow $250,000 to build a new home. the bank charges an interest rate of 8% compounded monthly. if you pay back the loan over 30 years, your monthly payments is: $1,834
Monthly payment can be defined as the money a parson received on a monthly basis.
Now let find the monthly payments using this formula
Present value of annuity = [ 1- (1+ r)^ n) ] /r × Annuity
Where:
P = principal = $250,000
r = rate of return = 0.08 / 12 = 0.0066666667
n = time period = 12 × 30 = 360
Let plug in the formula so as to solve for annuities (A)
250000 = 1-(1+0.0067)^-360)/ 0.0066666667 × annuities
250000 = 1-(10067)^-360)/ 0.0066666667 × annuities
250000 =135.767a
a = $1,834
Therefore we can conclude that the correct option is C.
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