Your friend Mere has just bought a house for $850,000 with a 20% down payment and a 80% mortgage loan for 30 years at a fixed annual interest rate of 6.95%, compounded monthly. She is scheduled to repay interest and principal every month over the loan period unless she sells the house at some point and fully pay off the loan. [Note: the mortgage rate being fixed over 30 years is a simplified assumption for the purpose of this exercise. In practice, banks do not normally commit to a fixed rate for such a long period of time.]