Question
Question 2: Breaking a Mortgage (8 marks) Consider entering into the following mortgage: Size of initial loan = $450,000 (ignore any possible insurance) 3-year term.
Question 2: Breaking a Mortgage (8 marks)
Consider entering into the following mortgage:
Size of initial loan = $450,000 (ignore any possible insurance)
3-year term.
Closed, fixed rate of interest equal to 4.5% APR.
20-year amortization period.
Monthly payments.
Part A: Please compute the monthly payments and determine how much principal is left after one year of payments (assuming no change in interest rates).
Part B: Assume that, after one year of payments, interest rates drop to 3.65% APR. Would you break the mortgage and refinance at the new rate? Please show all relevant calculations and ex-plain your choice. Do not forget to state any assumptions you make in arriving at your answer.
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Essentials Of Health Care Finance
Authors: William O. Cleverley
3rd Edition
0834203413, 978-0834203419
