Question

You are purchasing a house and your bank is giving you a special mortgage that will require annual payments for

25 years. The amount borrowed now is $350,000 and the first mortgage payment will be in one year.

a. Using C as the payment​ amount, indicate on a timeline all of the cash flows from your perspective related to this mortgage​ (outflows should be indicated as a negative​ number).

b. What will your payments be if the interest rate is 3.2 % per​ year?

c. What will your payments be if the interest rate is 6.2 % per​ year?

d. Comparing your answers in parts b and​ c, when interest rates increased by 3 %

Answer 1

a.

b.

c

d.

Now, when the interest rate is 3.2% the total payment done is 495600, and when the interest rate is increased by 3%, to 6.2%, the total payment to be done are 632100, hence the payable amount increased by 27.54%

Hope above explanations and calculations are sufficient. pls let me know if you need any further help.