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Essentials Of Investments
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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You have are a considering a mortgage from First Bank and Trust. It carries an interest rate 4.92% (APR based on monthly compounding), a 30-year term, and a payment of $1,976 per month. Your financial advisor is suggesting you consider a deal where you make payments bi-weekly instead of monthly. This is, instead of payment $1,976 every month, you can make half that payment every two weeks (i.e., 52/2 = 26 payments per year). Under this alternative, and keeping the EAR of the mortgage unchanged, how long will it take to pay off the mortgage? Note: If you round intermediate calculations, do so carefully: you should have at least 8 decimal places for all intermediate calculations. It will take you approximately years to pay it off, and the number of payments will be. (Round number of payements to two decimal places and enter the years rounded to the nearest whole number.).
Transcribed Image Text:You have are a considering a mortgage from First Bank and Trust. It carries an interest rate 4.92% (APR based on monthly compounding), a 30-year term, and a payment of $1,976 per month. Your financial advisor is suggesting you consider a deal where you make payments bi-weekly instead of monthly. This is, instead of payment $1,976 every month, you can make half that payment every two weeks (i.e., 52/2 = 26 payments per year). Under this alternative, and keeping the EAR of the mortgage unchanged, how long will it take to pay off the mortgage? Note: If you round intermediate calculations, do so carefully: you should have at least 8 decimal places for all intermediate calculations. It will take you approximately years to pay it off, and the number of payments will be. (Round number of payements to two decimal places and enter the years rounded to the nearest whole number.).
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