Mortgage Loan with Blended, Equal Monthly Payments at Belair Ltd. On November 1, 2018, Belair Ltd. purchased
Question:
Mortgage Loan with Blended, Equal Monthly Payments at Belair Ltd. On November 1, 2018, Belair Ltd. purchased land in Kamloops, B.C. for CAD 8,000,000. The land is being used to construct a new amusement park for summer visitors. Valley First Credit Union provided the financing but required a down payment of 40.00%. Belair negotiated a 9-year amortization period and a 5-year term with an interest rate of 8.00%, compounded semi-annually. Blended equal monthly payments will be made at the end of each month. (Note: Canadian institutions quote rates assuming semi-annual compounding.)
REQUIRED: 1. Calculate the monthly payment on the loan.
2. Prepare an amortization table for the first two payments.
3. Describe three actions Belair could take to lower the monthly payment calculated in Part 1 if it was not affordable.
Solve Process:
1. Calculate the compounding rate (semi-annual).
2. Calculate the period rate (monthly) that results in a compounded rate matching the answer to step 1.
3. Use the calculator to calculate the payment and then the amortized amounts.
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas