Practice midsession answers2

Practice midsession answers2 - Answers Question 1 - (12...

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Answers Question 1 - (12 marks) The Stepford family purchased a duplex in western Sydney four years ago for $395,000. They paid a $15,000 deposit and financed the balance through a mortgage repayable over 25 years which required equal payments to be made at the end of each month. At that time there was an interest rate of 5.5% p.a. compounded monthly. (a) What were the original mortgage payments? A = 395,000 - 15,000 = 380,000 (0.5 marks) 3 00458 . 0 12 055 . 0 = = r (0.5 marks) ( ) ( ) 300 25 12 300 380,000 0.004583 1 1.004583 $2,333.53 n R =×= = =  (1 mark) Today the Stepford family has just been advised that the interest rate is to increase to 7.0% p.a. and that interest will be compounded daily. The family has been given the choice of two options to continue paying the mortgage. Option 1: Make higher monthly payments for the remaining 21 years. Option 2: Continue the same payments but extend the period of the loan. (b) What is the amount of each new payment under Option 1? 90 . 303 , 348 3 00458 . 0 ) 3 00458 . 1 ( 1 53 . 2333 . . 252 = = O P (1 mark) 005850 . 0 1 365 07 . 0
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This note was uploaded on 10/17/2010 for the course D dd taught by Professor Ddd during the Spring '10 term at Clayton.

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Practice midsession answers2 - Answers Question 1 - (12...

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