On December 31, 1995, a house is purchased with the buyer taking out a 30-year $90,000 mortgage at 9% interest compounded monthly. The mortgage payments are made at the end of each month. Calculate the amount of the monthly payment.

So on this case the reasonable value for the 30 year mortgage monthly payment would be 724.16

See explanation below.

Explanation:

For this case we can use the fomrula for the amortized mortgage payment given by:

Where:

M represent the monthly payment

P=90000 represent the mortage principal

I = represent the monthly interest, on this case i = 0.09/12= 0.0075. Because is not appropiate use i =0.09 for this case since we got a value of 8100 for the PMT (monthly payment), and this value not makes sense at all.

n = 12*30 =360 represent the number of periods or months on this case

As we can see we have everything in order to replace, so we have this:

So on this case the reasonable value for the 30 year mortgage monthly payment would be 724.16

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