Question

**Fifty percent of the purchase
price is debt. The debt has an interest rate of 4% per annum and
you must repay $25,000 in principal at the end of each
year.**

**Questions**

**How much mortgage is recorded at the time of purchase?****400,000****500,000****550,000****600,000**

**What is your mortgage balance at the time of sale?****375,000****475,000****500,000****625,000**

Answer #1

**Working Notes:**

Loan Payment / Principal Paid at the end of each year = $25,000

Interest Rate = 4% p.a.

Mortgage Balance (at the time of Sale) = Loan Payment / Interest Rate = $25,000 / 4% = $625,000

Mortgage Recorded at the time of Purchase = Total Balance at year end – Principal paid at year end

= $625,000 - $25,000 = $600,000

**Questions**

**1.**
**How much mortgage is recorded
at the time of purchase?**

The Correct Answer is
**Option D = $600,000**

**2.**
**What is your mortgage balance
at the time of sale?**

The Correct Answer is
**Option D = $625,000**

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