Your friend tells you he has a very simple trick for taking one-third of the time it takes to repay your mortgage: Use your holiday bonus to make an extra payment on January 1 of each year (that is, pay your monthly payment due on that day twice). Assume that the mortgage has an original balance of $100,000, has an original term of 30 years, and has an APR of 12.0%. a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first extra payment at the end of the first year, in what year will you finish repaying your mortgage? b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment each January, in how many months will you pay off your mortgage? c. How will the amount of time it takes to pay off the loan given this strategy vary with the interest rate on the loan? Note: Make sure to round all intermediate calculations to at least 6 decimal places. …... a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first extra payment at the end of the first year, in what year will you finish repaying your mortgage? The loan payment is $. (Round to the nearest cent.) The approximate number of years to pay off the loan is years. (Round to two decimal places.) Because the mortgage will take about years to pay off this way which years-your friend is ▼ . close to 2/3 of its life of 30 (Round to the nearest integer and select from the drop-down menus.) b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment each January, in how many months will you pay off your mortgage? The approximate number of years is years. (Round to two decimal places.)
Your friend tells you he has a very simple trick for taking one-third of the time it takes to repay your mortgage: Use your holiday bonus to make an extra payment on January 1 of each year (that is, pay your monthly payment due on that day twice). Assume that the mortgage has an original balance of $100,000, has an original term of 30 years, and has an APR of 12.0%. a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first extra payment at the end of the first year, in what year will you finish repaying your mortgage? b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment each January, in how many months will you pay off your mortgage? c. How will the amount of time it takes to pay off the loan given this strategy vary with the interest rate on the loan? Note: Make sure to round all intermediate calculations to at least 6 decimal places. …... a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first extra payment at the end of the first year, in what year will you finish repaying your mortgage? The loan payment is $. (Round to the nearest cent.) The approximate number of years to pay off the loan is years. (Round to two decimal places.) Because the mortgage will take about years to pay off this way which years-your friend is ▼ . close to 2/3 of its life of 30 (Round to the nearest integer and select from the drop-down menus.) b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment each January, in how many months will you pay off your mortgage? The approximate number of years is years. (Round to two decimal places.)
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:Your friend tells you he has a very simple trick for taking one-third of the time it takes to repay your mortgage: Use your
holiday bonus to make an extra payment on January 1 of each year (that is, pay your monthly payment due on that day
twice). Assume that the mortgage has an original balance of $100,000, has an original term of 30 years, and has an
APR of 12.0%.
a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first
extra payment at the end of the first year, in what year will you finish repaying your mortgage?
b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment
each January, in how many months will you pay off your mortgage?
c. How will the amount of time it takes to pay off the loan given this strategy vary with the interest rate on the loan?
Note: Make sure to round all intermediate calculations to at least 6 decimal places.
...
a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first
extra payment at the end of the first year, in what year will you finish repaying your mortgage?
The loan payment is $
(Round to the nearest cent.)
The approximate number of years to pay off the loan is
Because the mortgage will take about
years-your friend is
years. (Round to two decimal places.)
years to pay off this way-which
(Round to the nearest integer and select from the drop-down menus.)
close to 2/3 of its life of 30
b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment
each January, in how many months will you pay off your mortgage?
The approximate number of years is years. (Round to two decimal places.)
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