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3 Q008 Negative Amortization a. Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover
3 Q008 Negative Amortization a. Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover the total amount of interest that has accrued. Pedro decides to purchase a house that costs $231,000. The bank requires a 10% downpayment and will provide a 15 year mortgage at a annual interest rate of 8%. The bank tells Pedro that his monthly mortgage payments will be $1,987.28. Pedro decides that that is too much, so the bank offers Pedro a lesser monthly payment amount in the form of a negative amortization payment. "pick your payment", Pedro can pay as much or as little as Pedro wants for the first year of the mortgage. Pedro decides to pay only $1,279.69. a month. Calculate the mortgage loan amount, the monthly payment will be is $1,279.69. Use four 4 decimal places THEN round dollar values to the nearest penny. 5 points b. Create an negative amortization schedule for the first 4 months of Pedro's mortgage. 10 points
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