Calculating Loan Interest and Payments

Jane and Rick are buying a house for $220,233 in Mesa with a 5.14% APR mortgage. They plan a 9% down payment, reducing the loan amount to $200,412.03. The interest for the year is $10,301.18, and the daily interest is $28.22. Since they close on October 11th, they pay 20 days of prepaid interest, totaling $564.40.

What is the purchase price of the house Jane and Rick are buying?

• $250,000

• $200,412

• $180,000

• $220,233

What is the APR of the mortgage Jane and Rick have been approved for?

• 4.5%

• 3.75%

• 5.14%

• 6.0%

What percentage of the house price are Jane and Rick planning to pay as a down payment?

• 10%

• 15%

• 5%

• 9%

How much money do Jane and Rick need to borrow from the bank after the down payment?

• $200,412.03

• $220,233.00

• $180,000.00

• $210,000.00

Why do Jane and Rick not need to borrow the entire house price?

• The bank offered a lower rate

• They are making a down payment

• They received a discount

• They are paying in cash

What is the first step in calculating the interest rate for the loan?

• Subtract the down payment from the house price

• Convert the APR to a decimal

• Multiply the borrowed amount by the APR

• Divide the APR by 12

What is the interest amount for the year based on the borrowed amount?

• $11,000.00

• $9,500.00

• $10,301.18

• $8,750.00

What is the significance of converting the APR to a decimal?

• It is required by the bank

• It increases the interest rate

• It simplifies the calculation

• It reduces the loan term

How is the daily interest calculated?

• Divide the annual interest by 12

• Multiply the APR by 365

• Multiply the borrowed amount by the daily rate

• Divide the annual interest by 365

How many days of prepaid interest do Jane and Rick need to pay for October?

• 31 days

• 20 days

• 10 days

• 15 days