A borrower takes out a $280,000 mortgage at an annual interest rate of 4.5%. What is the interest portion of the first month's payment?
Correct Answer
B) $1,050
To find the first month's interest, multiply the loan amount by the annual interest rate and divide by 12: $280,000 × 0.045 ÷ 12 = $1,050. Because no principal has yet been paid, the full loan balance is used for the first month's calculation.
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