5. Consider a 30-year fixed-rate mortgage for $100,000 at a nominal rate of 8%. If the...

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5. Consider a 30-year fixed-rate mortgage for $100,000 at a nominal rate of 8%. If the borrower pays an additional $200 with

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Answer 1

Answer #1

Let the payment frequency be monthly
Monthly payment=100000*8%/12*1/(1-1/(1+8%/12)^(12*30))=733.7645739
New monthly payment=733.7645739+200=933.7645739
Time required=ln(1/(1-100000/933.7645739*(8%/12)))/ln(1+8%/12)=188.3664704 months

Faster by 12*30-188.36=171.64 months

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Answer 2

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