Compare amount of interest in the two sets of loan payments

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Reference no: EM131837999

Some banks allow you to skip a loan payment and roll it into your principal. This is especially attractive in January when the Christmas VISA bill arrives. Consider the following simplified example. You renovated your house last year and borrowed $90,000. The term of the loan is three? years, the rate is 11?% ?(APR), and the annual? (end-of-year) payments are$36,829.18.You? can't afford to make the first payment. You want to roll it into your principal. Your bank has offered to increase the size of the second and third payments to allow you to do this. Answer the following two questions.

a. What will your new? (second and? third) loan payments? be? ? (Hold everything else in your loan? constant, e.g., remaining amortization period and interest? rate.)

b. Compare the amount of interest in the two sets of loan payments. How much more interest do you pay over the life of the loan? (if you skip the first?payment) compared to what you would have paid if you? hadn't skipped the first? payment?

a. What will your new? (second and? third) loan payments? be?

Reference no: EM131837999

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