The Taylors agreed to monthly payments rounded up to the nearest $100 on a mortgage of $175000 amortized over 15 years. Interest for the first five years was 6.25% compounded semi- annually. After 30 months, as permitted by the mortgage agreement, the Taylors increased the rounded monthly payment by 10%. a) Determine the mortgage balance at the end of the five-year term. b) If the interest rate remains unchanged over the remaining term, how many more of the increased payments will amortize the mortgage balance? c) How much did the Taylors save by exercising the increase-in-payment option?
The Taylors agreed to monthly payments rounded up to the nearest $100 on a mortgage of $175000 amortized over 15 years. Interest for the first five years was 6.25% compounded semi- annually. After 30 months, as permitted by the mortgage agreement, the Taylors increased the rounded monthly payment by 10%. a) Determine the mortgage balance at the end of the five-year term. b) If the interest rate remains unchanged over the remaining term, how many more of the increased payments will amortize the mortgage balance? c) How much did the Taylors save by exercising the increase-in-payment option?
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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Transcribed Image Text:The Taylors agreed to monthly payments rounded up to the nearest $100 on a mortgage of
$175000 amortized over 15 years. Interest for the first five years was 6.25% compounded semi-
annually. After 30 months, as permitted by the mortgage agreement, the Taylors increased the
rounded monthly payment by 10%.
a) Determine the mortgage balance at the end of the five-year term.
b) If the interest rate remains unchanged over the remaining term, how many more of the increased
payments will amortize the mortgage balance?
c) How much did the Taylors save by exercising the increase-in-payment option?
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