Two years ago, Elizabeth Maynes took out a ten year $400,000 mortgage loan from XYZ Bank Limited at an annual interest rate of 6% compounded semiannually. ABC Bank Limited is offering an eight year mortgage loan at 5% interest rate per year compounded semiannually. In order to settle existing mortgage loan with XYZ, Elizabeth has to pay a penalty equivalent to last 3 months of interest (months 22, 23, and 24).

1. Determine the monthly payment for the original mortgage loan.
2. Determine the principal outstanding today on the original mortgage loan.
3. Determine the amount of interest paid to date.
4. Should Elizabeth switch to ABC? Support your answer with numerical calculations.

Answer rating: 100% (QA)

To calculate the monthly payment for the original mortgage loan we first need to determine the numbe... View the full answer