The charts show the effect of an interest rate adjustment on an adjustable-rate mortgage. Before adjustment Component Cost (P) Principal $200,000 (R) Monthly interest rate point 4 percent (n) Total number of monthly payments remaining 360 (M) Monthly payment 1 dollars comma 059 point 8 5 After adjustment Component Cost (P) Principal $187,000 (R) Monthly interest rate point 5 percent (n) Total number of monthly payments remaining 336 (M) Monthly payment 1 dollars comma 162 point 5 6 The change in interest rate shown in the charts resulted in
Answer
A
a higher principal.
B
a lower interest rate.
C
a higher monthly payment.
D
a higher number of payments.
Explanation
Before the adjustment, the monthly payment was $1,059.85. After the interest rate increased from 4% to 5%, the monthly payment rose to $1,162.56, so the change resulted in a higher monthly payment. The principal and number of remaining payments both decreased, not increased.
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