(a) Determine the number of rounded payments required to repay the mortgage. (b) Determine the size of the last payment. (c) Calculate the amount of interest saved by rounding the payment up to the next higher $100 versus rounding the payment to the nearest cent.

(a) Determine the number of rounded payments required to repay the mortgage. (b) Determine the size of the last payment. (c) Calculate the amount of interest saved by rounding the payment up to the next higher $100 versus rounding the payment to the nearest cent.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Question

A $96,000 mortgage is to be repaid over a fifteen-year period by monthly payments rounded up to the next-higher $100. Interest is 7.7% compounded semi-annually.

(a)	Determine the number of rounded payments required to repay the mortgage.
(b)	Determine the size of the last payment.
(c)	Calculate the amount of interest saved by rounding the payment up to the next higher $100 versus rounding the payment to the nearest cent.

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