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John opened a bar and plans to ask $200,000 loan for decorating and buying new facilities. Bank suggests two options for financing the loan: a
John opened a bar and plans to ask $200,000 loan for decorating and buying new facilities. Bank suggests two options for financing the loan: a 20 year mortgage at 4% APR and a 30 year mortgage at 8% APR.
i) What is the difference in monthly payments (for the first 20 years) between these two options?
ii) If John would like to prepay the mortgage (pay the remainder of the loan in a single payment before maturity), how much does he need to pay at the end of 15th year
for both options? Assume monthly compounding.
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