Part 4 (Chapter 14): Hassan and Dana had bought a property valued at $1,225,000 for 20% down and a mortgage amortized over 25 years on March 1, 2018. They made equal end-of-month payments towards their mortgage. Interest on the mortgage was 3.29% compounded semi-annually and the mortgage was renewable after five years. 9. What was the size of each monthly payment? 10. What is the cost of the mortgage for the first 5 years? 11. In November 2020, they decided to refinance their mortgage since rates were down by quite a lot. Suppose the new rate they qualified for was 1.74% compounded semi-annually and they could borrow enough to cover their remaining mortgage balance. The new mortgage is amortized over 25 years, but they also need to pay a penalty for breaking the old mortgage early. If the penalty is the interest differential over the remaining term of the old mortgage (under the old and the new rates), and if the penalty is also added to the new mortgage, what is the size of their new monthly payment?
Part 4 (Chapter 14): Hassan and Dana had bought a property valued at $1,225,000 for 20% down and a mortgage amortized over 25 years on March 1, 2018. They made equal end-of-month payments towards their mortgage. Interest on the mortgage was 3.29% compounded semi-annually and the mortgage was renewable after five years. 9. What was the size of each monthly payment? 10. What is the cost of the mortgage for the first 5 years? 11. In November 2020, they decided to refinance their mortgage since rates were down by quite a lot. Suppose the new rate they qualified for was 1.74% compounded semi-annually and they could borrow enough to cover their remaining mortgage balance. The new mortgage is amortized over 25 years, but they also need to pay a penalty for breaking the old mortgage early. If the penalty is the interest differential over the remaining term of the old mortgage (under the old and the new rates), and if the penalty is also added to the new mortgage, what is the size of their new monthly payment?
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 24PROB
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Transcribed Image Text:Part 4 (Chapter 14):
Hassan and Dana had bought a property valued at $1,225,000 for 20% down and a mortgage
amortized over 25 years on March 1, 2018. They made equal end-of-month payments towards
their mortgage. Interest on the mortgage was 3.29% compounded semi-annually and the
mortgage was renewable after five years.
9. What was the size of each monthly payment?
10. What is the cost of the mortgage for the first 5 years?
11. In November 2020, they decided to refinance their mortgage since rates were down by
quite a lot. Suppose the new rate they qualified for was 1.74% compounded semi-annually
and they could borrow enough to cover their remaining mortgage balance. The new
mortgage is amortized over 25 years, but they also need to pay a penalty for breaking the
old mortgage early.
If the penalty is the interest differential over the remaining term of the old mortgage
(under the old and the new rates), and if the penalty is also added to the new mortgage,
what is the size of their new monthly payment?
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