A variable-rate mortgage of $124,000 is amortized over 25 years by equal monthly payments. After 18 months the original interest rate of 5% compounded semi-annually was raised to 8.5% compounded semi-annually. Three years after the mortgage was taken out, it was renewed at the request of the mortgagor at a fixed rate of 7.4% compounded semi-annually for a four-year term. (a) Calculate the mortgage balance after 18 months. (b) Compute the size of the new monthly payment at the 8.5% rate of interest. (c) Determine the mortgage balance at the end of the four-year term. (a) The mortgage balance is $ after 18 months. (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

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Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.