Jan sold her house on December 31 and took a $10,000 mortgage aspart of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls forsemiannual payments beginning next June 30. Next year Jan must report on Schedule B ofher IRS Form 1040 the amount of interest that was included in the two payments she receivedduring the year.a. What is the dollar amount of each payment Jan receives?b. How much interest was included in the first payment? How much repayment of principalwas included? How do these values change for the second payment?c. How much interest must Jan report on Schedule B for the first year? Will her interestincome be the same next year?d. If the payments are constant, why does the amount of interest income change over time?

Question

Jan sold her house on December 31 and took a $10,000 mortgage as
part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for
semiannual payments beginning next June 30. Next year Jan must report on Schedule B of
her IRS Form 1040 the amount of interest that was included in the two payments she received
during the year.
a. What is the dollar amount of each payment Jan receives?
b. How much interest was included in the first payment? How much repayment of principal
was included? How do these values change for the second payment?
c. How much interest must Jan report on Schedule B for the first year? Will her interest
income be the same next year?
d. If the payments are constant, why does the amount of interest income change over time?

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