Question
Problem 5-22 Loan amortization Jan sold her house on December 31 and took a $5,000 mortgage as part of the payment. The 10-year mortgage has
Problem 5-22 Loan amortization
Jan sold her house on December 31 and took a $5,000 mortgage as part of the payment. The 10-year mortgage has a 8% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year.
- What is the dollar amount of each payment Jan receives? Round your answer to the nearest cent. $
How much interest was included in the first payment? Round your answer to the nearest cent. $
How much repayment of principal was included? Round your answer to the nearest cent. $
How do these values change for the second payment?
- The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal increases.
- The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal decreases.
- The portion of the payment that is applied to interest and the portion of the payment that is applied to principal remains the same throughout the life of the loan.
- The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal also declines.
- The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal also increases.
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