Alysha needs to borrow $180,000 to purchase her new house in Yarmouth, Nova Scotia. She would like to pay off the mortgage in 20 years, making monthly payments. For the initial three-year term, Blossom Bank has offered her a quoted annual rate of 7.0 percent.

1>What is the effective annual interest rate? Interest is compounded semi-annually?

2>What is the effective monthly interest rate?

3>How much will Alysha's monthly mortgage payments be?

4>Yarmouth Credit Union will provide Alysha with a mortgage at a rate of 6.96 percent, but unlike most Canadian mortgages, the compounding will occur monthly. Should Alysha take the mortgage loan from Yarmouth Credit Union or from Blossom Bank?

Answer rating: 100% (QA)

To answer the questions lets calculate the effective annual interest rate the effective monthly interest rate and the monthly mortgage payments for bo... View the full answer