California Real Estate Practice Exam

How much total interest will a borrower pay on a $250,000, 30-year, fixed-rate, amortized loan at 5%, when the monthly payment is $1,342.50?

1. $233,300

2. $483,000

3. $100,000

4. $150,250

The correct answer is: $233,300

The total interest paid on a loan is determined by multiplying the total number of monthly payments (in this case, 30 years x 12 months = 360 total payments) by the monthly payment amount. In this case, the borrower will make 360 payments of $1,342.50, resulting in a total of $483,000 paid over the life of the loan. However, since the original loan amount was only $250,000, this means that $233,300 of the total amount paid will be interest. Options C and D are incorrect because they do not take into account the length of the loan or the fact that it is a fixed-rate loan with interest compounding over time. Option B is incorrect because it does not take into account the original loan amount, only the total amount paid.