If an adjustable-rate 30-year mortgage for $120,000 starts at 4.0 percent and increases to 5.5 percent, what is the increase in the monthly payment amount? Use Exhibit 7-7. (Do not round intermediate calculations. Round your answer to 2 decimal place

The increase in the monthly payment amount is $180

Explanation:

In order to calculate the increase in the monthly payment amount we would have to make the following calculation:

increase in the monthly payment amount=installment increase-installment

installment=(loan amount/1,000)*rate of interest

installment=($120,000/1,000)*4

installment=$480

installment increase=(loan amount/1,000)*rate of interest

installment increase=($120,000/1,000)*5.5

installment increase=$660

increase in the monthly payment amount=$660-$480

increase in the monthly payment amount=$180

The increase in the monthly payment amount is $180

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