Future Business Leaders of America (FBLA) Business Calculations Practice Test

What will Bill's mortgage balance be next month if his current balance is $70,000 with a 7% annual interest rate and a monthly payment of $465?

1. $69,591.67

2. $65,115.95

3. $69,943.33

4. $65,100.00

The correct answer is: $69,943.33

To determine Bill's mortgage balance for the next month, the interest for the upcoming month must first be calculated based on the current balance and the annual interest rate. The annual interest rate is 7%, which translates to a monthly interest rate of approximately 0.5833% (7% divided by 12 months). This can be expressed as a decimal for calculations: 0.07 / 12 = 0.005833. Next, calculating the interest for the next month on the current balance of $70,000 involves multiplying the balance by the monthly interest rate: Interest = Current Balance × Monthly Interest Rate Interest = $70,000 × 0.005833 ≈ $408.31. Now, this interest is added to the current balance to find out the total amount owed before subtracting the payment for that month. By adding the interest: Total Amount Owed = Current Balance + Interest Total Amount Owed = $70,000 + $408.31 ≈ $70,408.31. To find the remaining balance after making the mortgage payment, subtract the monthly payment of $465 from the total amount owed: Remaining Balance = Total Amount Owed - Monthly Payment Remaining Balance ≈ $70