A client has a $300,000 mortgage at 4.5% annually, compounded semi-annually, with a 25-year amortization. What is the monthly payment amount?
Correct Answer
C) $1,660.42
The monthly rate equivalent to 4.5% compounded semi-annually is (1 + 0.045/2)^(1/6) - 1 = 0.37153%. Over 300 monthly payments, the payment is $300,000 x 0.0037153 / (1 - 1.0037153^-300) = $1,660.42.
Why This Is the Correct Answer
This is correct because converting 4.5% compounded semi-annually gives a monthly rate of 0.37153%, and applying the payment formula over 300 months to $300,000 produces a payment of $1,660.42.
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