A mortgage of $105,400 was to be amortized over seven years. The interest rate was a variable, closed rate of 2.35% compounded semi-annually. Three years after the mortgage was issued, the Bank of Canada increased its prime lending rate. Therefore, the variable interest rate on the mortgage increased to 2.85% compounded semi-annually and remained the same for the rest of the term.

a. During the first three years, what was the size of the monthly payments, rounded up to the next $10?

b. What was the balance on the mortgage at the end of three years?

c. During the last four years, what was the size of the monthly payments, rounded up to the next $10? What was the size of the final payment?

AppendixLO1