Asked by Jamie Stallings on May 21, 2024
Verified
A mortgage contract for $145,000 written 10 years ago is just at the end of its second five-year term. The interest rates were 8% compounded semi-annually for the first term and 7% compounded semi-annually for the second term. If monthly payments throughout have been based on a 25-year amortization, calculate the principal balance at the end of the second term.
Amortization
The method of distributing a loan across a sequence of consistent installments over a period.
Principal Balance
The remaining amount of money borrowed or invested, excluding any interest or fees.
Compounded Semi-annually
Interest on an investment or loan is calculated and added to the principal twice a year.
- Calculate the principal balance of a mortgage or loan at the end of a term.
- Compute payments for different types of loan amortization scenarios.
Verified Answer
JJ
Learning Objectives
- Calculate the principal balance of a mortgage or loan at the end of a term.
- Compute payments for different types of loan amortization scenarios.