David purchases a home in Charlottesville, Virginia for $480,000. He makes a 20% down payment and finances the remainder with a deed of trust loan at an annual interest rate of 6%. What is David's first month's interest payment?
Correct Answer
A) $1,920
Step 1: Calculate the loan amount. Down payment = $480,000 × 20% = $96,000. Loan amount = $480,000 − $96,000 = $384,000. Step 2: Calculate the annual interest. Annual interest = $384,000 × 6% = $23,040. Step 3: Calculate the first month's interest. Monthly interest = $23,040 ÷ 12 = $1,920. The first month's interest payment is $1,920.
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