You are considering buying a two bedroom apartment in Back Bay for $600,000. You plan to make a $100,000 down payment and take out a $500,000 30-year mortgage for the rest. The interest rate on the mortgage is 8.5% monthly APR.

How much do you owe the bank immediately after the 60th monthly payment?

• $187,389
• $225,125
• $395,250
• $477,451
• $542,766

References

Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.

Solution: D

[[math]]\frac{3844.57}{0.0070833}\left[1-\frac{1}{1.0070833}^{(12 \times 30-60)}\right]=\$ 477,451.33[[/math]]

References

Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.