Answer the following questions that are related to your purchase of your first home for $500,000.

You have just purchased the house and have put a 20% down payment, and will borrow the remaining amount. The 15-year fixed rate loan has an Annual Percentage Rate (APR) of 3.75%. You will make monthly payments for the life of the loan.

Q1: Your effective interest rate is closest to which of the following?

a. 3.815%

b. 3.687%

c. 3.880%

d. 3.750%

Q2. How much is your monthly payment?

a. More than $2,500

b. $1,000 to $1,500

c. $2,000 to $2,500

d. Less than $1,000

e. $1,500 to $2,000

Q3. Assume that you make payments for one year. How much have you reduced the principal balance that is, the amount that you owe on the loan?

a. Less than $5,000

b. $10,000 to $15,000

c. More than $20,000

d. $15,000 to $20,000

e. $5,000 to $10,000

Q4. After one year, how much have you paid in interest?

a. $10,000 to $15,000

b. $5,000 to $10,000

c. $15,000 to $20,000

d. More than $20,000

e. Less than $5,000