A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
Correct Answer
B) $550
Why this is correct: In any mortgage payment, the portion allocated to principal is calculated by subtracting the interest portion from the total principal-and-interest payment. Here, $1,800 (total P&I) - $1,250 (interest) = $550 principal. Why the other choices are wrong: '$450' is wrong; it is not supported by the given numbers. '$1,250' is wrong because that is the interest amount, not the principal. '$3,050' is wrong; it appears to be an incorrect sum of the two given numbers rather than the difference. Exam tip: For principal/interest split questions, use the formula: Principal = Total P&I Payment - Interest. The question specifies 'principal-and-interest payment,' so escrow is not involved in this calculation.
Why This Is the Correct Answer
Why this is correct: In any mortgage payment, the portion allocated to principal is calculated by subtracting the interest portion from the total principal-and-interest payment. Here, $1,800 (total P&I) - $1,250 (interest) = $550 principal. Why the other choices are wrong: '$450' is wrong; it is not supported by the given numbers. '$1,250' is wrong because that is the interest amount, not the principal. '$3,050' is wrong; it appears to be an incorrect sum of the two given numbers rather than the difference. Exam tip: For principal/interest split questions, use the formula: Principal = Total P&I Payment - Interest. The question specifies 'principal-and-interest payment,' so escrow is not involved in this calculation.
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