Explain the difference between an ordinary annuity and an annuity due. (Multiple Choice) A. Ordinary annuities earn simple interest. Annuities due earn compound interest. B. Annuities due have higher interest rates than ordinary annuities. C. Annuities due have lower interest rates than ordinary annuities. D. With an ordinary annuity, payments are made at the end of each period. With an annuity due, payments are made at the beginning of each period. E. Ordinary annuities have fixed interest rates. With an annuity due, the interest rate may change.

Mortgage A couple can afford to make a monthly mortgage payment of $650. If the mortgage rate is 9% and the couple intends to secure a 30-year mortgage, how much can they borrow?

DISCOVR: Amortizing a Mortgage When they bought their house, John and Mary took out a $90,000 mortgage at 9% interest, repayable monthly over 30 years. Their payment is $724.17 per month (check this, using the formula in the text). The bank gave them an amortization schedule, which is a table showing how much of each payment is interest, how much goes toward the principal, and the remaining principal after each payment. The table below shows the first few entries in the amortization schedule. After 10 years they have made 120 payments and are wondering how much they still owe, but they have lost the amortization schedule. How much do John and Mary still owe on their mortgage? [Hint: The remaining balance is the present value of the 240 remaining payments.] How much of their next payment is interest, and how much goes towards the principal? [Hint: Since 912=o.75 , they must pay 0.75% of the remaining principal in interest each month.]