Answer to Question #205233 in Financial Math for Doreen

Question #205233

A couple purchased a home and signed a mortgage contract for $500, 000 to be paid with half-yearly payments over a 25-year period. The interest rate applicable is j2 = 8.5% p.a. applicable for the first five years, with the condition that the interest rate will be increased by 4% every 5 years for the remaining term of the loan. Based on the given information, your group is required to use Excel software to: (a) Calculate the half-yearly payment required for each five-year interval [10 marks] (b) Calculate the loan outstanding (outstanding balance) at the beginning of each five year interval. [10 marks] (c) Prepare a loan amortization table for the final 12 half-years of the loan term. [10 marks]

Expert's answer

Mortgage is a value which is borrowed from the other sources like banks to arrange the funds and this amount is repaid later with an extra payment i.e. interest.