Question: Josephine needs to borrow 180 000 to purchase her new house

Josephine needs to borrow $180,000 to purchase her new house in Yarmouth, Nova Scotia. She would like to pay off the mortgage in 20 years, making monthly payments. For the initial three-year term, Providence Bank has offered her a quoted annual rate of 6.40 percent.
a. What is the effective annual interest rate?
b. What is the effective monthly interest rate?
c. How much will Josephine’s monthly mortgage payments be?
d. Yarmouth Credit Union will provide Josephine with a mortgage at a rate of 6.36 percent, but unlike most Canadian mortgages, the compounding will occur monthly. Should Josephine take out the mortgage loan from Yarmouth Credit Union or from Providence Bank?

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  • CreatedFebruary 25, 2015
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