1) The nominal annual interest rate is 8% compounded monthly. Deal A: You loan me $5000 today and I pay you back $2000 in 1 year, and $4000 in 2 years. Deal B: I loan you $1000 today and another $3000 in 1 year and you pay me $X in 2 years. What does SX have to be for you to be indifferent between these two deals?

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A: Future value is calculated by compounding the present value at a given compounding rate.

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A: Real rate of interest refers to the rate of return that does not include inflation and taxes. It is…

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Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.