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Take a T Google Chrome Secure https:/ www math com/Student/Playe Test.aspx?quizme=18 chapterld=7&sectionId;=2&back-StudyPanRecommendations.aspx;%3fchapterld%3d7%26sld%3d2%260bjectiveld%3d 19626filterOption%3d0. BMGT 340 fall 2017 11/17/17 1:58 PM Quiz Me: Quiz Me: 5.2 Application: Discount Rates and Loans Submit Quiz This Question: 1 pt 5 of 5 This Quiz: 5 pts possible Your friend tells you he has a very simple trick for taking one-third of the time it takes to repay your mortgage: Use your Christmas bonus to make an extra payment on January 1 of each year (that is, pay your monthly payment due on that day twice). Assume that the mortgage has an original term of 30 years and has an APR of 12% a. If you take out your mortgage on January 1 (so that your first payment is due on February 1), and you make your first extra payment at the end of the first year, in what year will you finish repaying your mortgage? b. If you take out your mortgage on July 1 (so that the first payment is on August 1), and you make the extra payment each January in how many months will you pay off your mortgage? c. How will the amount of time it takes to pay off the loan given this strategy vary with the interest rate on the loan? a. The principal balance does not matter, so let's assume the balance is $100,000. Begin by computing the monthly payment. The loan payment is 1028.61 (Round to the nearest cent) The approximate number of years is(Round to two decimal places.) Select from the drop-down menu and round to the nearest integer.) Because the mortgage will take about years to pay off this way-which | | close to 2,3 of its life of 30 years-your friend is | b. The approximate number of years is(Round to two decimal places.) Select from the drop-down menu and round to the nearest integer) Because the mortgage will take about years to pay off this way-which | | close to 2/ 3 of its life of 30 years-your friend is | Click to select your answers). Save for Later

Explanation / Answer

a. EMI:

b. Amortisation schedule using double payments every 12 months:

It took 233 months= 233/12= 19.42 years to repay under this approach.

this way mortage will take about 19.42 years to pay off this way which is close to 2/3 of its life of 30 years your friend is correct

Period payment = [P x R x (1+R)^N]/[(1+R)^N-1] Principle P 100000 Rate of interest per period R 1% 12%/12 Number of payments N 360 Period payment using the formula 1028.613

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