Mortgages and other amortized loans (meaning equal or blended payments) involve regular payments at fixed intervals. These are sometimes called reverse annuities, because you get a lump-sum amount as a loan in the beginning, and then you make the periodic payments (usually monthly or more frequently, depending on the agreement) to the lender. You've decided to buy a house that is valued at $1 million. You have $150,000 to use as a down payment on the house, and you take out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $850,000 and is offering you a 25-year mortgage with 12% fixed nominal interest rate (called the APR, or Annual Percentage Rate) compounded semi-annually. According to this proposal, what will be your monthly mortgage payment? $10, 964 $11, 841 $13, 595 $8, 771 Your friends suggest that you take a 15-year mortgage, because a 25-year mortgage is too long and you will lose a lot of money on Interest. If your bank approves a 15-year, $850,000 loan at a fixed nominal interest rate of 12% (APR), what will be the difference in the payments of the 15-year mortgage and 25-year mortgage? It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more interest will you pay if you take out a 25-year mortgage instead of a 15-year mortgage? Which of the following statements is not true about mortgages? Mortgages always have a fixed nominal interest rate. The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and the interest due. The ending balance of an amortized loan contract will be zero. Mortgages are examples of amortized loans