A couple purchased a home and signed a mortgage contract for $180,000 to be paid with monthly payments over a 25-year period at j2 = 10% p.a. The interest rate is fixed for 5 years. After 5 years, the loan then becomes variable with an interest rate of j2 = 6.5% p.a. They negotiate the interest rate and refinance the loan at j2 = 6.5% p.a. and there is no penalty if a mortgage is refinanced at the end of an interest rate guarantee period.

Calculate:

(a)The monthly payment for the initial 5-year period. [2 marks]

(b)The new monthly payments after 5 years. [8 marks]

(c) The accumulated value of the savings if it is deposited in a bank at j12 = 4.5% over a 5-year period. [5 marks] (d)The outstanding balance at the end of 10 years. [5 marks]