# Many mortgage lenders offer the flexibility of dividing a mortgage loan between a fixed-interest-rate portion and a

## Question:

Suppose a $100,000 mortgage loan with a 25-year amortization is divided equally between a fixed-rate portion at 6.6% compounded semiannually and a variable-rate portion at 5.4% compounded monthly. (Quoted rates on variable-rate mortgages are normally monthly compounded rates.)

a. What is the initial (combined) monthly payment?

b. What will be the combined monthly payment if the variable rate jumps to 6.6% compounded monthly after two years?

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