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# hw7 gorvett - UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN...

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UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN Actuarial Science Program DEPARTMENT OF MATHEMATICS Math 210 P r o f . R i c k G o r v e t t Theory of Interest Fall, 2008 Homework Assignment # 7 (max. points = 10) Due at the beginning of class on Thursday, November 13, 2008 You are encouraged to work on these problems in groups of no more than 3 or 4. However, each student must hand in her/his own answer sheet. Please show your work – enough to show that you understand how to do the problem – and circle your final answer. Full credit can only be given if the answer and approach are appropriate. Please give answers to two decimal places – e.g., xx.xx% and \$xx,xxx.xx . 1) You take out a 30-year \$300,000 mortgage at an effective annual interest rate of 10%. Immediately after the 8 th payment, you make an additional principal repayment of \$10,000, and then refinance the outstanding balance with a new 15-year mortgage at a 5% effective annual interest rate. Both mortgages require annual year-end level amortization payments. Find the amount of principal in the 10

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hw7 gorvett - UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN...

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