You purchase a house for $1,500,000. You pay 20% with your savings and finance the balance with a 25- year mortgage. The mortgage rate is 8% (you should know that this is an APR compounded semi- annually). The mortgage required monthly payments.

a) Calculate the monthly payment.

b) Calculate the outstanding balance of the mortgage at the end of year 5.

Assume the above mortgage rate is fixed at 8% for 5 years only. Now (at the end of year 5) it is reset to 12%. You also negotiate with the bank to reduce the remaining term from 20 years to 15 years.

c) Calculate the new monthly payment.

d) Calculate the outstanding balance of the mortgage at the end of year 10.

At the end of year 10, you decide to change your future monthly payment to $10,000.

e) How many more payments are needed to pay off the mortgage?

f) What is the last payment amount?