Alternatively, you can obtain from your bank a 30-year interest-only (IO) mortgage with an introductory teaser interest rate of 3.6% (APR with monthly compounding). This complex mortgage will require you to only pay the introductory interest rate on the loan for the first 5 years (i.e., first 60 monthly payments). Subsequently, the

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
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Alternatively, you can obtain from your bank a 30-year interest-only (IO) mortgage with an introductory teaser interest rate of 3.6% (APR with monthly compounding). This complex mortgage will require you to only pay the introductory interest rate on the loan for the first 5 years (i.e., first 60 monthly payments). Subsequently, the mortgage will become a standard fully-amortizing mortgage for the remaining maturity of 25 years at an interest rate of 6% (APR with monthly compounding). Your mortgage loan amount will still be $750,000. Compute the required monthly payments for the first 5 years and the last 25 years.

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