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What are the monthly mortgage payments

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Question - To finance the purchase of a new home, a homebuyer takes-out a loan in the amount of $700,000 at 12% interest per year, compounded monthly. A balance of $200,000 will remain and be paid as a lump sum when the term expires in 10 years.

Required -

(a) What are the monthly mortgage payments the homebuyer must make to the lender?

(b) What is the outstanding balance of the loan at the end of 5 years?

(c) At the end of year 5, the market rate of interest is 6%. What is the market value of the loan at the end of 5 years?

(d) If the loan is sold at market value at the end of year 5, is this loan sold at a discount?

(e) Regardless of what your answer is for part (d), what is one reason why this mortgage lender would sell the loan at a discount?

Reference no: EM132730427

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