ive years ago, Ms. Halliday received a mortgage loan from the Bank of Money for $60,000 at 7.8% compounded semiannually for a five-year term. Monthly payments were based on a 25-year amortization. The bank is agreeable to renewing the loan for another five-year term at 6.8% compounded semiannually. Calculate the principal reduction that will occur in the second five-year term if: a) The payments are recalculated based on the new interest rate and a continuation of the original 25-year amortization. b) Ms. Halliday continues to make the same payments as she made for the first five years (resulting in a reduction of the amortization period).
ive years ago, Ms. Halliday received a mortgage loan from the Bank of Money for $60,000 at 7.8% compounded semiannually for a five-year term. Monthly payments were based on a 25-year amortization. The bank is agreeable to renewing the loan for another five-year term at 6.8% compounded semiannually. Calculate the principal reduction that will occur in the second five-year term if: a) The payments are recalculated based on the new interest rate and a continuation of the original 25-year amortization. b) Ms. Halliday continues to make the same payments as she made for the first five years (resulting in a reduction of the amortization period).
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 17P
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Five years ago, Ms. Halliday received a mortgage loan from the Bank of Money for $60,000 at 7.8% compounded semiannually for a five-year term. Monthly payments were based on a 25-year amortization. The bank is agreeable to renewing the loan for another five-year term at 6.8% compounded semiannually. Calculate the principal reduction that will occur in the second five-year term if:
a) The payments are recalculated based on the new interest rate and a continuation of the original 25-year amortization.
b) Ms. Halliday continues to make the same payments as she made for the first five years (resulting in a reduction of the amortization period).
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