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PLEASE SHOW WORK FOR EACH ANSWER 2. Loan Amortization . James wants to buy a house...

PLEASE SHOW WORK FOR EACH ANSWER

2. Loan Amortization . James wants to buy a house worth $1,000,000. To do so, he takes out a mortgage loan equal to the price of the house. The mortgage has to be repaid after 15 years and make monthly payments with an APR of 10%. Given this information, answer the following

(a) . Draw the timeline that describes all cash flows (paid and received) throughout the duration of the loan. On the timeline, you must also indicate what is the last period/payment! Denote the period cash flow payment as C.

(b) How can James calculate what is the payment C he has to make on that loan? (Write down the formula together with all information necessary to calculate the payment C. The final expression should have C on the left side and all other information on the right side of the equation).

(c). After 14 years of paying off the mortgage, James has accumulated enough savings that he wants to pay off the remainder of that loan. How much does James still owe on his mortgage 14 years after he first started making payments? (NOTE: You only need to write down the formula that would calculate the value of the remainder of the loan).

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jeff jeffy answered 1 year ago
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