A variable-rate mortgage of $300,000 is arranged with annual interest 2.5%. The borrower thinks of using a monthly payment plan with the goal to fully retire the mortgage in 30 years.

(a) What would be the interest component and principal component of the 2nd month? Assume the monthly plan were used.

(b) Instead of monthly payment plan, the borrower actually uses the accelerated biweekly payment plan from time 0. How many years to fully retire the mortgage by using the accelerated plan, and how much interest costs he could save over the entire mortgage life, compared with the monthly plan?

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