Chapter 5, Problem 47QP

a)

Summary Introduction

To determine: Annual payment on loan.

b)

Summary Introduction

To construct: Mortgage amortization table.

c)

Summary Introduction

To determine: Fraction of initial loan payment is interest.

d)

Summary Introduction

To determine: Fraction of initial loan payment is amortization.

e)

Summary Introduction

To determine: Fraction of initial loan paid off after 10 years.

f)

Summary Introduction

To determine: Real value of first year payment, if inflation rate is 2%.

g)

Summary Introduction

To determine: Real value of last year payment, if inflation rate is 2%.

h)

Summary Introduction

To determine: New nominal interest rate when inflation rate is 8% and real interest rate on loan is unchanged.

i)

Summary Introduction

To determine: Amortization table when real value of first payment in this high inflation situation.

j)

Summary Introduction

To determine: Real value of last payment in this high inflation situation.