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c. Set up a 5-year payments, total interest, and principal paid annually, and the at the end of each year. (Do not set up a
c. Set up a 5-year payments, total interest, and principal paid annually, and the at the end of each year. (Do not set up a monthly amortization sched- ule to answer this problem.) Local lenders are offering the following terms for 30-year, fixed-rate mortgages. If your objective is to minimize the cost of borrowing, which alternative do you prefer? 5-6. CONTRACT INTEREST RATE (%) DISCOUNT POINTS 8.25 8.50 8.75 2.75 2.00 1.00 a. Assume monthly payments and that the mortgage is held to its matu- rity. What is the effective cost (APR) of each alternative? b. Assume monthly payments and a holding period of 5 years. What is the effective cost of each alternative? c. Assume that each mortgage has a 3 percent prepayment penalty. What is the effective cost of each alternative? Determine the monthly payment for the following mortgages of $90,000 5-7 c. Set up a 5-year payments, total interest, and principal paid annually, and the at the end of each year. (Do not set up a monthly amortization sched- ule to answer this problem.) Local lenders are offering the following terms for 30-year, fixed-rate mortgages. If your objective is to minimize the cost of borrowing, which alternative do you prefer? 5-6. CONTRACT INTEREST RATE (%) DISCOUNT POINTS 8.25 8.50 8.75 2.75 2.00 1.00 a. Assume monthly payments and that the mortgage is held to its matu- rity. What is the effective cost (APR) of each alternative? b. Assume monthly payments and a holding period of 5 years. What is the effective cost of each alternative? c. Assume that each mortgage has a 3 percent prepayment penalty. What is the effective cost of each alternative? Determine the monthly payment for the following mortgages of $90,000 5-7
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