California Real Estate Practice Exam 2026 - Free Real Estate Practice Questions and Study Guide

The first month's interest on a fixed rate loan is calculated by multiplying the loan amount by the interest rate and dividing by 12 (representing 12 months in a year). In this case, the loan amount is $360,000 and the interest rate is 7%. Therefore, the first month's interest is $360,000 x 0.07 / 12 = $2,100. However, the LTV ratio is 80%, meaning the borrower only requested a loan of 80% of the home's value. Therefore, the first month's interest is adjusted to 80% of $2,100, resulting in $1,680. Option B is incorrect because it does not take into account the LTV ratio and the fact that it is a fixed rate loan. Option C and D are incorrect as they do not accurately calculate the first month's interest for the given loan amount and interest rate.