Question 4 You financed the purchase of a $225,000 home with a down payment in cash of 20% of the purchase price. The remaining 80% is financed with a mortgage with a 0.40% monthly interest rate over the next 20 years. The mortgage is repaid with equal monthly installments at the end of each month. a) Compute the monthly installments on the mortgage. Monthly installment ($) 781.00 Sorry, try again b) What is the outstanding principal balance of the mortgage after 5 years (i.e., after 60 installments)? Outstanding principal balance ($) Sorry, try again c) Ten years later (after 120 installments), your bank manager offers to refinance your mortgage with a new loan carrying a 0.30% monthly interest rate for a one-time commission. What is the total potential gain from refinancing in present value terms? Total gain from refinancing ($) Sorry, try again Optional: For practice, you can try setting up a loan amortization table using the original mortgage terms. You can also try recalculating certain values (e.g., interest and principal payments in a given period, or over a given period) using Excel formulas. Refinancing a mortgage Cost of house Mortgage balance 225,000 180,000 Monthly interest rate Payment period (years) 0.40% 20 a) Monthly installment b) Period (years) Outstanding balance Period (years) Outstanding balance New loan monthly rate Market value of loan Gain from refinancing