Determine the annual repayment schedule for the first two years (i.e. interest,

Question

Determine the annual repayment schedule for the first two years (i.e. interest, principal payment, and balance owed) for each of the following. (Assume that only one payment is made annually.) Compare the payments required by each mortgage. What conclusions can you draw?

a) A $100,000 conventional mortgage for 25 years at 5 percent
b) A $100,000 conventional mortgage for 20 years at 5 percent
c) A $100,000 conventional mortgage for 25 years at 6 percent

do not copy and paste other chegg answer, my numbers are different!

Also do not copy and paste from any other website, I want to be able to do that in my word doc and print it and the bold does not copy!

Explanation / Answer

a) 100000 = PMT*PVIFA(5,25) = PMT*14.09

PMT = 100000/14.09 = $7097.23

b)

PMT = 100000/PVIFA(5,20) = 100000/12.46 = $8025.68

c)

PMT = 100000/PVIFA(6,25) = 100000/12.78 = $7824.72

as the time to maturity is increasing monthly installment is less keeping interest rate is constant

but PMT is more as the interest rate is more

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