The Martinezes are planning to refinance their home. The outstanding balance on their original loan is $100,000. Their finance company has offered them two options. (Assume there are no additional finance charges. Round your answers to the nearest cent.) Option A: A fixed-rate mortgage at an interest rate of 2.5%/year compounded monthly, payable over a 30-year period in 360 equal monthly installments. Option B: A fixed-rate mortgage at an interest rate of 2.25%/year compounded monthly, payable over a 12-year period in 144 equal monthly installments. (a) Find the monthly payment required to amortize each of these loans over the life of the loan.  Option A Option B   (b) How much interest would the Martinezes save if they chose the 12-year mortgage instead of the 30-year mortgage?

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Loans

A loan is a term that we are all familiar with. The processing of loans is one of the most important functions of a bank. It keeps our economy stable and facilitates the implementation of monetary policies. Let's take a look at the different forms of loans and get some answers to some common questions.