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Consider a home buyer planning to purchase a house that is currently worth $ 4 0 0 , 0 0 0 . The buyer will
Consider a home buyer planning to purchase a house that is currently worth $ The buyer will pay
$ today as a down payment on the house and borrow from a bank the rest of the purchase price.
a The bank currently offers a year mortgage at the interest rate of per year this is the average
mortgage rate as of February What should be the monthly payment on the mortgage?
Hint The interest rate of per year is equivalent to per month.
Hint : There will be monthly payments on the year loan.
b The buyer regrets that the buyer did not purchase a few years ago when the interest rate was Low. Sup
pose the mortgage rate is per year this was the average rate as of October on the year
mortgage. Then, what would be the monthly payment on the mortgage?
Hint: The interest rate of per year is equivalent to per month.
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