2. Suppose you borrowed $400,000 for a home mortgage on January 1, 2010 with an annual interest rate of 3.5% per year compounded monthly.

a. If you didn't make any payments and were only charged the interest (and no late fees), how much would you owe on the mortgage on January 1, 2030?

(b)Suppose you borrowed $400,000 for a home mortgage on January 1, 2010 with an annual interest rate of 3.5% per year compounded monthly. Also, suppose the balance on the mortgage is amortized over 20 years with equal monthly payments at the end of each month. (This means the unpaid balance on January 1, 2030 should be $0).

(b) What are the monthly payments?

c) How much interest was paid during the 20 years of the mortgage?

d) What is the unpaid balance on the mortgage on January 1, 2015?

Answer rating: 100% (QA)

a To calculate the amount owed on the mortgage on January 1 2030 if only the interest is charged and no payments are made we need to determine the accumulated interest over the 20year period Given Pri... View the full answer