For a $345,000 mortgage at 4.75% compounded quarterly over a 7-year term, what is the interest-only payment?

To determine the interest-only payment for a mortgage, the formula used is quite straightforward. The interest payment is calculated by taking the principal amount of the loan and multiplying it by the annual interest rate. Since the question specifies that the interest is compounded quarterly, we focus only on the annual interest rate for the interest-only calculation.

In this case, the mortgage amount is $345,000 with an interest rate of 4.75%. The interest payment can be calculated using the following formula:

Interest Payment = Principal Amount × Annual Interest Rate

Substituting the values:

Interest Payment = $345,000 × 0.0475 = $16,362.50

However, this amount represents the annual interest. To find the interest-only payment that would be made quarterly, this annual figure should be divided by the number of payment periods per year, which for quarterly payments is 4.

Thus, the quarterly interest payment is calculated as follows:

Quarterly Interest Payment = Annual Interest Payment ÷ 4

Quarterly Interest Payment = $16,362.50 ÷ 4 = $4,090.625

If the question specifically requests the total amount of interest paid over the 7-year term, you would multiply the quarterly payment by