Loan A

Mortgage: $100,000

Interest Rate: 7^3/4 (monthly payments)

Term: 30 years

1.) What is the monthly payment?

2.) What is the balance on this mortgage at the end of 3 years (36 months)?

3.) How much principal was paid during the 3 years?

4.) How much interest was paid during the 3 years?

Our lender is offering an alternative $100,000 loan at 7^1/2% for 30 years with 2 points.

5.) What is the effective interest rate on this alternative mortgage if held to maturity?

6.) If this alternative mortgage is only held for 3 years (36 months), what is the effective interest rate?

7.) If loan A has a prepayment penalty of 3% and the loan is paid off in 3 years (36 months), what is the effective interest rate?

8.) If loan A has a 2 point fee and a 3% prepayment penalty, and if the loan is paid off in 3 years (36 months), what is the effective interest rate?