Asked by Shane Bright on May 27, 2024
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A $100,000 mortgage at 6.8% compounded semi-annually with a 25-year amortization requires monthly payments. How much will the amortization period be shortened if payments are increased by 10% starting in the second year and a $10,000 lump payment is made along with the 24th payment?
Compounded Semi-annually
A method of calculating interest where the earned interest is added to the principal every six months, allowing interest to be earned on the previously earned interest.
Lump Payment
A single, large payment made at once, instead of breaking it into smaller installments.
Amortization Period
The length of time over which the principal amount of a loan, mortgage, or other debt is scheduled to be paid off.
- Gain insight into and determine the consequences of supplementary payments or one-time amounts on the duration of mortgage repayment.
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LC
Learning Objectives
- Gain insight into and determine the consequences of supplementary payments or one-time amounts on the duration of mortgage repayment.