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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 aninterest rate of 60% over 10years, amortized over 20 years (i.e. palmetrtsarecalculated 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 costequal to 2 monthly interest palrrents (i.e. two times the interest cost pe. month) at fte time ofbreaking the contact. Ace Mortgage Brokersapproach you with an offer of a 5 year fixedrate moftgage at 57o with equivalent amortization (i.e. now 15years ofamoftizatioo). Recall that morlgage interest rates ate quoted based on semi-annual compounding. 1. What areyour cunent a.naual palments? (1 mark) 2. Afterjust making youi last palrrlent, what is the principle owed on the mortgage?
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  • Fall '09
  • Y.Lawrynshyn
  • Trigraph, CHE374FE ngineeringconomic nalysis, quotedbasedon semi-annual ompounding., cunent a.naual alments, Ace Mo.tgageassuminghe costto, Afterjust makingyoui

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