CHE374F-2009-Quiz 4 Solution - CHE374FE ngineeringconomic...

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Name: CHE374F - Engineering Economic Analysis Quiz #4. November 18, 2009 so L uTta* Student Number: Tutorial Rm: GB Exactly five years ago, you "locked in" to a $300,000 fi-red mortgage, payable monthly (i.e. you just paid your 60th instalment), with an interest rate of 60% over 10 years, amortized over 20 years (i.e. palmetrts are calculated based otr a 20 year arnortization at 6%, but ailer 10 years (5 years from now) a new mortgage contact will be determined based on prcvailing market i4terest rates and the principie owing at that time). Note that to break the mortgage contmct therc is a penalty cost equal to 2 monthly interest palrrents (i.e. two times the interest cost pe. month) at fte time ofbreaking the contact. Ace Mortgage Brokers approach you with an offer of a 5 year fixed rate moftgage at 57o with equivalent amortization (i.e. now 15 years ofamoftizatioo). Recall that morlgage interest rates ate quoted based on semi-annual compounding.
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This note was uploaded on 10/18/2010 for the course ENGINEEIRI CHE374 taught by Professor Y.lawrynshyn during the Fall '09 term at University of Toronto- Toronto.

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CHE374F-2009-Quiz 4 Solution - CHE374FE ngineeringconomic...

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