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Question 7 (1 point) A mortgage company offers to lend you $250,000; the loan calls for monthly payments for 15 years with monthly interest rate of 0.5%. At the end of year one you plan to prepay $25,000. Assume the same monthly mortgage payment, the life of the mortgage will be shorten from the original 15 years to a) 11 years and 8 months. b) 12 years and 2 months. c) 12 years and 11 months. d) 13 years and 1 months. e) 13 years and 4 months. Question 8 (1 point)
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After 1 year, we are paying same monthly payments as computed above Remaining balance of loan - Present value of monthly payments S214,395.832 -Monthly payment [1-(1+I-n]/I $214,395.832-$2,109.64207 * [ 1-( 1 +0.5%Y-n] / 0.5% $214.395.832 / $2.10964207-[ 1-( 1.005 Y-n] / 0.005 101.626638 * 0.005 = [ 1-( 1.005 Y-n] [1-(1.005 -n]- 0.50813319 1.005 )A-n 1-0.50813319 ( 1.005 ) n 0.491 86681 (1.005 )^-n=0.49 (Rounded) To compute required term , go for trail and error approach. If required term , n 143 Months L.H.S = ( 1.005)^-143 0.49006442 = 0.49 (Rounded) = RHS Therefore required remaining term - 143 Months Total term to repay mortgage 12 Months (Completed) + 143 Months 2 - 155 Months Term in years = 155 Months / 12 = 12.916667 Years 12 Years and 1 1 Months (0.916667 * 12 Months - 11 Months) Ans C- 12 Years and 11 Months

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