How long will it take to pay off the mortgage

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Reference no: EM132721512

Questions -

Q1. You purchase a home with a 5%/year fixed-rate, 30-year mortgage. Interest is compounded monthly. The amount borrowed is $300,000. Every three months, you make an additional quarter payment which is used to pay off principal (e.g., at EOM 1 payment = A, at EOM 2 payment = A, at EOM 3 payment = 1.25A). How long will it take to pay off the mortgage? Include a cash flow diagram in your written work. Hints: The present worth of the sequence of payments must equal the amount borrowed. You can divide the payments into three parts: a uniform series paid monthly, a uniform series paid quarterly, and a single final payment that may be smaller than the typical payment.

Q2. For the previous problem, what is the total amount of interest paid over the life of the loan?

Reference no: EM132721512

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