Assume an elderly couple owns a $140,000 home that is free and clear of mortgage debt. A

Question:

Assume an elderly couple owns a $140,000 home that is free and clear of mortgage debt. A reverse mortgage (RAM) lender has agreed to a $100,000 RAM. The loan term is 12 years, the contract is 9.25%, and payments will be made at the end of each month.

a. What is the monthly payment on this RAM?

b. Fill in the following partial loan amortization table

Ending Balance Month Beginning Balance Monthly Payment Interest 3 4 5

c. What will be the loan balance at the end of the 12-year term?

d. What portion of the loan balance at the end of year 12 represents principal? What portion represents interest?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...