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John opened a bar and plans to ask for a $200000 loan for decorating and buying new facilities. Bank suggeststwo options for financing the loan:
John opened a bar and plans to ask for a $200000 loan for decorating and buying new facilities. Bank suggeststwo 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 monlthy payments for the first 20 years between these 2 options.
ii) If john would like to prepay the mortgage, pay the remainder of the loan in a single payment bfeore maturity, how much does he need to pay at the end of the 15th year for both options? Assume monthly compounding.
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