Question 2 (Ch 5): Present Value/ Future Value and Mortgage Payments and Balances

You purchase the townhome listed above at realtor.com and borrow 95% of the listed price from Broadway Bank at an APR of 6% with monthly payments (your down payment is 5% of listed price). The maturity of your mortgage equals 30 years with monthly payments.

a. Draw a time line that depicts the cash flows from the mortgage payments- compute the payment and show your inputs and work.

b. Compute the outstanding mortgage amount after you have made 15 years of payments. i. Show this point on the time line, and ii. give the inputs to your computations for full credit.

c. What is the interest and principal component of the next mortgage payment after making payments for: 5 years, 15 years and 25 years.