Gavin and Holly purchased a $665,000 condominium in Toronto. They paid 20% of the amount as a down payment and secured a 25-year mortage for the balance. They negotiated a fixed interest rate of 4.2% compounded semi-annually for a 5-year term with repayments made at the end of every month. Their mortgage contract also stated that they may prepay up to 15% of the original principal every year without at interest penalty. At the end of the first year, in addition to the regular monthly payment, they made a lump-sum payment of $27,000. a. What was the size of the monthly payment? Round to the nearest cent b. What was the principal balance at the end of the first year? Round to the nearest cent c. By how much did the amortization period shorten after they made the lump sum payment at the end of the first year?
Gavin and Holly purchased a $665,000 condominium in Toronto. They paid 20% of the amount as a down payment and secured a 25-year mortage for the balance. They negotiated a fixed interest rate of 4.2% compounded semi-annually for a 5-year term with repayments made at the end of every month. Their mortgage contract also stated that they may prepay up to 15% of the original principal every year without at interest penalty. At the end of the first year, in addition to the regular monthly payment, they made a lump-sum payment of $27,000. a. What was the size of the monthly payment? Round to the nearest cent b. What was the principal balance at the end of the first year? Round to the nearest cent c. By how much did the amortization period shorten after they made the lump sum payment at the end of the first year?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Gavin and Holly purchased a $665,000 condominium in Toronto. They paid 20% of the
amount as a down payment and secured a 25-year mortage for the balance. They
negotiated a fixed interest rate of 4.2% compounded semi-annually for a 5-year term
with repayments made at the end of every month. Their mortgage contract also stated
that they may prepay up to 15% of the original principal every year without at interest
penalty. At the end of the first year, in addition to the regular monthly payment, they
made a lump-sum payment of $27,000.
a. What was the size of the monthly payment?
Round to the nearest cent
b. What was the principal balance at the end of the first year?
Round to the nearest cent
c. By how much did the amortization period shorten after they made the lump sum
payment at the end of the first year?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education