A $198,000 mortgage amortized by monthlypayments over 20 years is renewable afterfive years. Interest is 4.65% compoundedsemi-annually.(a) What is the size of the monthly payments?(b) How much interest is paid during the firstyear?(c) How much of the principal is repaid duringthe first five-year term?(d) If the mortgage is renewed for a furtherfive-year term at 5.24% compounded semi-annually, what will be the size of the monthlypayments?(e) Construct a partial amortization scheduleshowing details of the first three payments foreach of the two five-year terms.Complete the schedule for the first threepayments of the first five-year term.Complete the schedule for the first threepayments of the second five-year term.

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A $198,000 mortgage amortized by monthly payments over 20 years is renewable after five years. Interest is 4.65% compounded semi-annually. (a) What is the size of the monthly payments? (b) How much interest is paid during the first year? (c) How much of the principal is repaid during the first five-year term?

A $198,000 mortgage amortized by monthly payments over 20 years is renewable after five years. Interest is 4.65% compounded semi-annually. (a) What is the size of the monthly payments? (b) How much interest is paid during the first year? (c) How much of the principal is repaid during the first five-year term?

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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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

100%

A $198,000 mortgage amortized by monthly
payments over 20 years is renewable after
five years. Interest is 4.65% compounded
semi-annually.
(a) What is the size of the monthly payments?
(b) How much interest is paid during the first
year?
(c) How much of the principal is repaid during
the first five-year term?
(d) If the mortgage is renewed for a further
five-year term at 5.24% compounded semi-
annually, what will be the size of the monthly
payments?
(e) Construct a partial amortization schedule
showing details of the first three payments for
each of the two five-year terms.
Complete the schedule for the first three
payments of the first five-year term.
Complete the schedule for the first three
payments of the second five-year term.

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