- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 42. Fixed-Income Securities: Defining Elements
- Subject 1. Basic Features of a Fixed-Income Security

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**CFA Practice Question**

Given that a 6%, 15-year, $100,000 mortgage has a payment of $843.86 per month, what is the amount of the interest component of the first monthly payment?

B. $500.00

C. $600.00

A. $400.00

B. $500.00

C. $600.00

Correct Answer: B

Interest component = monthly rate x outstanding balance

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**User Contributed Comments**
6

User |
Comment |
---|---|

pangar04 |
Can someone explain how you get this answer? sorry im confused |

abeeman924 |
Simple interest payment calculation just use 12 months instead of semi-annual. $100,000 x 0.06 = $6,000 $6,000/12 (months = $500 worth of interest per month on your mortgage payment The other $343.86 out of the total $843.86 is a return of principal. |

Yrazzaq88 |
0.06 / 12 = 0.005 0.005 x 100,000 = $500 per month |

mbowa |
Thanks abeeman924, i was confused as well |

lal191561 |
nice questions |

raulmartin |
Thanks for the help |