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Understanding the Periodic Interest Rate: Mortgages

CORPFN-FYMEPR

Consider a mortgage for \$250,000 with an annual interest rate of 3.83% annually requiring a monthly payment of \$1,170.

As interest is compounded monthly on a mortgage, what is the periodic interest rate, the first month's interest payment, and the first month's principal payment (rounded to the nearest penny)?

A

Periodic interest rate: 0.0031917%
First month's interest: \$7.98
First month's principal: \$1162.02

B

Periodic interest rate: 0.31917%
First month's interest: \$797.92
First month's principal: \$372.08

C

Periodic interest rate: 3.83%
First month's interest: \$1170.00
First month's principal: \$0.00

D

Periodic interest rate: 0.0383%
First month's interest: \$95.75
First month's principal: \$1074.25