The accompanying table shows how the two mortgages

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Unformatted text preview: . Suppose you invested $431 each month in a mutual fund with an average annual return of 7 percent. At the end of 15 years, your $77,580 investment would have grown to $136,611, or $59,031 more than you contributed! However, many people lack the self-discipline to save rather than spend that money. For them, the 15-year mortgage represents forced savings. Yet another option is to make additional principal payments whenever possible. This shortens the life of the loan without committing you to the higher payments. By paying just $100 more each month, you can shorten the life of a 30year mortgage to 24 1/4 years, with attendant interest savings. Sources: Daniela Deane, “Adding Up Pros, Cons of 15-Year Loans,” Washington Post (October 13, 2001), p. H7; Henry Savage, “Is 15-Year Loan Right for You?” Washington Times (June 22, 2001), p. F22; Carlos Tejada, “Sweet Fifteen: Shorter Mortgages Are Gaining Support,” Wall Street Journal (September 17, 1998), p. C1; Ann Tergesen, “It’s Time to Refinance . . . Again,...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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