UNIVERSITY OF ILLINOIS AT URBANACHAMPAIGN
Actuarial Science Program
DEPARTMENT OF MATHEMATICS
Math 210
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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 30year $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 15year mortgage at a 5% effective
annual interest rate.
Both mortgages require annual yearend level amortization payments.
Find the amount of principal in the 10
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 Spring '08
 Hubscher
 Actuarial Science, Interest Rates, Annual Percentage Rate, annual coupon bond

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