Mortgage Broker Licensing Practice Exam · Question
A mortgage has a principal amount of $400,000, an interest rate of 5.00% compounded semi-annually, and a 25-year amortization period. What is the approximate monthly payment?
First, calculate the effective monthly rate. EAR = (1 + 0.05/2)^2 - 1 = 0.050625. Monthly rate = (1 + EAR)^(1/12) - 1 = (1 + 0.050625)^(1/12) - 1 = 0.0041239. O
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Question: A mortgage has a principal amount of $400,000, an interest rate of 5.00% compounded semi-annually, and a 25-year amortization period. What is the approximate monthly payment?
Answer options:
- $2,325.26 ✅ $2,336.54
- $2,488.75
- $2,510.98
Correct answer: $2,336.54
Explanation: First, calculate the effective monthly rate. EAR = (1 + 0.05/2)^2 - 1 = 0.050625. Monthly rate = (1 + EAR)^(1/12) - 1 = (1 + 0.050625)^(1/12) - 1 = 0.0041239. Or using a financial calculator: Monthly rate = (1 + i/2)^2 = (1 + 0.05/2)^2 - 1 => (1 + 0.025)^2 - 1 = 1.050625 - 1 = 0.050625. Monthly equivalent rate: (1 + 0.050625)^(1/12) - 1 = 0.0041239. Using the PMT formula: P = $400,000, i = 0.0041239, n = 25 * 12 = 300. PMT = P * [i / (1 - (1 + i)^-n)] = $400,000 * [0.0041239 / (1 - (1.0041239)^-300)] = $2,336.54.
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Related Questions
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- Ontario mortgage agents must complete which of the following at each licence renewal?
- Which entity is responsible for licensing and regulating mortgage brokers and agents in Ontario?
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Question explanations
- What is the typical time frame for a mortgage agent to provide the required disclosure statement to a client?
- Funds received from a client or investor that the brokerage holds on their behalf must be deposited into:
- Ontario mortgage agents must complete which of the following at each licence renewal?
- Which entity is responsible for licensing and regulating mortgage brokers and agents in Ontario?
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