In Example 5.10, we showed you how to work out mortgage payments. Log on to the per- sonal finance page of www.bankrate.com and find the mortgage payment calculator. Assume a 20-year mortgage loan of $100,000 and an interest rate (APR) of 12%. What is the amount of the monthly payment? Check that you get the same answer when using the annuity formula. Now look at how much of the first month's payment goes to reduce the size of the mortgage. How much of the payment by the 10th year? Can you explain why the figure changes? If the interest rate doubles, would you expect the mortgage payment to double? Check whether you are right. 1