Problem 7-16

This extended problem covers many of the features of a mortgage. You purchase a town house for $300,000. Since you are able to make a down payment of 20 percent ($60,000), you are able to obtain a $240,000 mortgage loan for 15 years at a 6 percent annual rate of interest. Use Appendix D to answer the questions. Round your answers to the nearest dollar.

1. What are the annual payments that cover the interest and principal repayment? $

2. How much of the first payment goes to cover the interest? $

3. How much of the loan is paid off during the first year? $

4. What is the interest payment during the second year? $

5. What is the remaining balance after the second year? $

6. Why did the interest payment change during the second year? The annual -Select-increasedecreaseItem in the amount owed -Select-increasesdecreasesItem each subsequent interest payment.