Josephine needs to borrow $180,000 to purchase her new house in Yarmouth, Nova Scotia. She would like

Question:

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 will occur monthly. Should Josephine take out the mortgage loan from Yarmouth Credit Union or from Providence Bank?

Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will...