Question
Q3. (a) Principal prepayment policies vary among lending institutions. When applying for or assuming a loan, the borrower should determine the prepayment options and requirements
Q3. (a) Principal prepayment policies vary among lending institutions. When applying for or assuming a loan, the borrower should determine the prepayment options and requirements of the loan. Why prepayments are minor importance for
automobile loan-backed securities? (14 marks)
(b) The mortgage on your house is seven years old. It required monthly payments of RM1,345, had an original term of 30 years, and had an annual interest rate of 9 percent. In the intervening five years, interest rates have fallen and so you have decided to refinance - that is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a 30-year term, requires monthly payments, and has an annual interest rate of 5.67 percent.
- What monthly repayments will be required with the new loan?
(6 marks)
- Construct an amortization schedule on new loan for months 7 to 11.
(10 marks)
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