You have decided to become a student landlord and plan to buy a house in “The...

You have decided to become a student landlord and plan to buy a house in “The Village” for $920,000. You parents have agreed to supply $200,000 to be used as a down payment, leaving $720,000 to be financed by means of a mortgage. The mortgage broker has quoted 5.25% quoted rate based on a 25-year amortization, which will be compounded semi-annually in accordance with Canadian law.

a) What would be the amount of monthly payments on the mortgage?

b) What would be the principal outstanding after five (5) years?

Round your final answer to 2 decimal points

Solutions

Expert Solution

GIVEN THAT:-

1. PRINCIPAL LOAN AMOUNT = 720000

2. INTEREST RATE = 5.25%, COMPUNDED SEMI ANNUALLY

3. TENURE OF LOAN = 25 YEARS

NOW HERE IT IS GIVEN THAT INTEREST IS COMPOUNDED SEMI ANNUALLY HENCE WE HAVE TO CONVERT IT TO ANNUAL COMPUNDING INTEREST RATE.

jeff jeffy answered 1 year ago

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