The interest rate for the first three years of an $87,500 mortgage is 4.4% compounded semiannually. Monthly payments are based on a 20-year amortization. If a $4,200 prepayment is made at the end of the sixteenth month. a. How much will the amortization period be shortened? The amortization period will be shortened by months, b. What will be the principal balance at the end of the three-year term? (Round your answer to the nearest cent.)

The interest rate for the first three years of an $87,500 mortgage is 4.4% compounded semiannually. Monthly payments are based on a 20-year amortization. If a $4,200 prepayment is made at the end of the sixteenth month. a. How much will the amortization period be shortened? The amortization period will be shortened by months, b. What will be the principal balance at the end of the three-year term? (Round your answer to the nearest cent.)

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

The interest rate for the first three years of an $87,500 mortgage is 4.4% compounded semiannually. Monthly payments
are based on a 20-year amortization. If a $4,200 prepayment is made at the end of the sixteenth month. a. How much
will the amortization period be shortened? The amortization period will be shortened by months, b. What will be the
principal balance at the end of the three-year term? (Round your answer to the nearest cent.)

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