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You want to buy a house using mortgage Local lenders are offering the following terms for 3 0 - year, monthly amortizing fixed rate mortgages.

You want to buy a house using mortgage Local lenders are offering the following terms for

30 -

year, monthly amortizing fixed rate mortgages.

If you hold the mortgage to maturity, which contract do you prefer?

Assume a holding period of five years and NO prepayment Which contract do you prefer now?

Assume a holding period of ten years and NO prepayment Which contract do you prefer now? PLEASE SHOW WORK!

Assume that the pre

-

payment penalty is applied. Which contract do you prefer now, considering a

5

year holding period?

Assume that the loan is held to maturity. Which contract do you prefer now?

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