adms_3530_assignment_1_fall_2012_solution

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Unformatted text preview: a) For the fixed rate mortgage with 1800 25 12 300 1 1 4.99% 0.0499 Effective Rate (m = 2): 1 0.0499 2 1 0.050522503 1 0.004115752 Monthly rate (m = 12): 1 1 1.050522503 Calculating present value: 1 1 1 1800 1 0.004115752 1 0.004115752 1.004115752 1800 172.1064147 $309791.55 Page 5 of 18 #3b) FOR THE VARIABLE RATE MORTGAGE 25 12 300 0 3.1% 0.031 300,000 ?? Effective Rate (m = 2): 1 1 1 0.031 2 1 0.03124025 Monthly rate (m = 12): 1 1 1.03124025 1 0.002566806 Calculating monthly payment: 1 1 1 1 0.002566806 300,000 1 0.002566806 1.002566806 300,000 209.0338252 300,000 209.0338252 $1435.174426 At the end of year 5, 60 (12 × 5) payments have been made. Remaining number of payments = 300 – 60 = 240 Calculating remaining balance at the end of year 5 (That is, the present v...
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