Question

Do not round intermediate calculations. Final dollar answers should be rounded to two decimal places. Final interest rate answers should be rounded to 4 decimal places if stated as a percentage, and 6 decimal places otherwise. Final answers indicating periods should be rounded up to whole periods.

PLEASE SHOW ALL WORK! WITHOUT FINANCIAL CALCULATOR

You will be paying off a mortgage of $250,000 over the next 25 years. You have signed a loan agreement with Me-Bank to secure a fixed rate of 5.00%. The mortgage loan is compounded semi-annually.

complete a) to e) if the mortgage loan is compounded annually.

a)         What are the monthly payments? [4 points]

b)         How much will your payments be over the first five years? [2 points]

c)         What is the amount of principal that you pay off with the first payment? [2 points]

d)         How much principal remains to be paid after the first five years? [2 points]

e)         How much will remain to be paid off after you have made your payment at the end of the 15^th year? [2 points]

Answer 1

Formulae