A buyer is purchasing a home in San Diego for $650,000. The buyer is putting 20% down and obtaining a 30-year fixed mortgage at 6.5% annual interest. The lender requires the buyer to prepay the first month's interest at closing. What is the prepaid interest amount for one month?
Correct Answer
D) $2,816.67
Step 1: Calculate the loan amount: $650,000 × 80% = $520,000. Step 2: Calculate monthly interest: $520,000 × 6.5% ÷ 12 = $520,000 × 0.065 ÷ 12 = $33,800 ÷ 12 = $2,816.67.
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