PLEASE ANSWER PART B and C

RI AFF210 W2001 - Problem Stor x x R courses iyeron/e/content/468844/viewContent/3504119/View PROBLEM ONE (20 MARKS) You are planning to buy a house in Toronto that has a price of $1,500,000. One of the local banks has offered you a mortgage at a quoted rate of 5% per year. Interest will be compounded semi- annually. The bank has indicated that they will require 25% down payment. The bank is prepared to lend you the remainder of the purchase price of the house. The amortization period will be 25 years and the term of the mortgage will be 4 years. You are going to make monthly payments on your mortgage. The payments will be made at the end of each period. You have heard from your friend who has just completed AFF210, that by making additional payments on your mortgage during the ituitial term, you can reduce the remaining balatice at the end of the initial term. Your friend has shown you a sample amortization schedule template (below). Sample Mortgage Schedule Payment Principal Interest Balance Amount Principal Principal Principal Nuruber Amount Expense Owing of Component Amount Paid / incurred Before Payment of Payment at the Amount Beginning during Payment End of of the Period Payment month 1 2 at the a) Answer the following questions: What is the amount of your periodic payment? ii. How much will you pay in total on your mortgage over the life of your mortgage? 1. What is total interest that will be paid over the life of your mortgage? iv. How much principal will you have paid off during the initial term of your mortgage? V. How much interest will you have paid off during the initial term of your mortgage? b) Prepare a mortgage anortization schedule to illustrate how the mortgage will be repaid over the next 25 years and calculate the following: c) Assuming that you decide to make additional annual payments of S10,000 during the initial lettu of your mortgage, how much less do you owe to the bank at the end of the term? The extra payments will be made in months 12. 21. 36 and 48. Assuming you make no additional extra payments during the life of your mortgage how much interest do you save, by making the extra payments during the initial term of your mortgage? + D t 3 B 2 View Text Download >> Type here to search O W A ING 1058 AM 2001-01-07