Consider a floating rate mortgage loan of $200,000 for the amortization period of 20 years Assume monthly mortgage payments and the mortgage rate reset every six months as follows Mortgage rate The prime rate 20 The loan contract specifies that the prime rate used in each reset period will be one that will be prevailing at the beginning of the reset period Assume that at the time of the loan, the prime rate is 28, while after six months, it will become 4 Also, assume monthly compounding of the mortgage rate. Calculate monthly mortgage payments in each of the initial six months of the mortgage loan and in each of the subsequent six months.

Answer rating: 100% (QA)

Monthly mortgage for first 6 months Interest rate Margin Prime rate 2 28 48 pa Interest rate per mon... View the full answer