1. You purchase a home with a 5%/year fixed-rate, 30-year mortgage. Interest is compounded monthly. The amount borrowed is $300,000.Every three months, you make an additional quarter payment which is used to pay off principal (e.g., at EOM 1 payment = A, at EOM 2 payment = A, at EOM 3 payment = 1.25A). How long will it take to pay off the mortgage? Include a cash flow diagram in your written work. Hints: The present worth of the sequence of payments must equal the amount borrowed. You can divide the payments into three parts: a uniform series paid monthly,a uniform seriespaid quarterly, and a single final payment that may be smaller than the typical payment.
2. For the previous problem, what is the total amount of interest paid over the life of the loan?