(Mortgage + EAIR) Your local bank has offered you a 20-year, $100,000 mortgage. The bank is charging 1.5 points, with “processing” costs of $750;

both points and processing costs are deducted from the mortgage when it is given. The mortgage carries a 10% annual interest rate and is paid in equal monthly payments. Note that the monthly payments on the mortgage are calculated on the full amount of the mortgage (that is, $100,000).

a. Calculate the monthly payment on the mortgage, show the amortization table, and compute the EAIR.

b. Will the EAIR of the mortgage change if the loan period is 6 years?

c. Compute the total interest paid in each year of the mortgage. You can base your answer on the amortization table or investigate the Excel function Cumipmt.