3. Suppose you are taking out a mortgage for $300,000, with an annual rate of interest of six percent. Mortgage payments are made and interest is compounded monthly. (A) What is the monthly mortgage payment for a 20-year mortgage? Hint: if you've forgotten how to do this, write down an equation that $300,000 equals the present value of the sum of 240 monthly payments. Let X be the monthly payment, and let r be the effective monthly interest rate. Then multiply the equation you have by 1/1+r to get another equation that you can subtract from the first one to simplify. (B) What nart of the first monthly navment is renavment of princinal?
3. Suppose you are taking out a mortgage for $300,000, with an annual rate of interest of six percent. Mortgage payments are made and interest is compounded monthly. (A) What is the monthly mortgage payment for a 20-year mortgage? Hint: if you've forgotten how to do this, write down an equation that $300,000 equals the present value of the sum of 240 monthly payments. Let X be the monthly payment, and let r be the effective monthly interest rate. Then multiply the equation you have by 1/1+r to get another equation that you can subtract from the first one to simplify. (B) What nart of the first monthly navment is renavment of princinal?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:3. Suppose you are taking out a mortgage for $300,000, with an annual rate of interest of six
percent. Mortgage payments are made and interest is compounded monthly.
(A) What is the monthly mortgage payment for a 20-year mortgage? Hint: if you've forgotten
how to do this, write down an equation that $300,000 equals the present value of the sum of 240
monthly payments. Let X be the monthly payment, and let r be the effective monthly interest
rate. Then multiply the equation you have by 1/1+r to get another equation that you can subtract
from the first one to simplify.
(B) What part of the first monthly payment is repayment of principal?
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