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12. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of casin flews. An investor can invest money with a particular bank and eam a stated interest rate of 15.40%; however, interest will be compounded euarterly. What. are the nominal, periodic, and effective interest rates for this imvestment opporturity? Rahul needs a loan and is speaking to several iending agencies about the interest rates they would charge and the terms they offer ife farticularty Wkes his local bank because he is being offered a nominal rate of 14%. But the bank is compounding monthiy. What is the effective interest rate that. Rabul would pay for the toan? 15,2484 15,0559 1479386 14.93496 Rahui needs a lokn and is apeaking to seversi lending agencies about the intenet rates they mosid charge and the ternis they ofter ite particularly itiohi would per for the lobn? Another bark is alde sfiening favorable teme, so Rabul decides to take a loan af sto,ood frem this bank. He sighs the ban contragt at 7 he campounded daly for eine moneht. Based on a 365 -day yeac, what is the totak amount that Rahui owes the bank at the end of the loan's terim) (Hint? To caloulate the number of days. didide the mamber of mentho by 12 and miecioly by 365i) 110.222.90 510,207.94 510,589,07 5:1,371.41 13. Mortgage payments Mortgages, loans taken to ourchase a property, involve regular payments at fixed intervals and are treated as reverse annuties. Mortgages are the. reverse of annuities, because you get a lump-sum amount as a losn in the beginning. and then you make monthly payments to the iender. You've decided to buy a house that is valued at $1 milion, You have $250,600 to use as a down payment on the haite, and want to take out a mortgage for the remainder of the purchase price. Your bank hos approved your $750,000 mortgage, and is offering a standard 30 -year mortgage at a 104 fixed nominal interest rate (called the loan's annual percentage rate or APR) Under this loan proposal, your morkage payment iil be per month. (Note: Round the final value of any interest rate used to four decimal places.) Your friends suggest that you take a 15 -year mortgoge, because a 30 -year mortgage is too long and you will pay a lot of meney on inferest. If your bank approves a 15 -year, $750,000 toan at a fixed nominal interest rate of 104 (APR), then the difference in the monthly payment of the 15 -year mortgage and 30 -year mortgage wall be. 7(Note: Pound the final value of any interest rate used to focr decimal places. ) It is likely that you wont like the prospect of paying more money each month, but if you do take out a 15 year mortgbge, you will make far fewer psyments and will pay a lot less in interest. How much more total interest will you pary over the iffe of the loan if you take out a. 30 -year mortgage instead of a 15 -year mortgage? 51,267,7B1,44 51,084,045,00 51,175.913.22 $918,682:20 Year triends suggest that you tave a 15 -year martoage, because a 30 -year mortgage is too long and you mill pay a lot of money on lenterest. If yeur bank approves a 15 -ynar, $750,000 loan at a fixed nominal interest rate of 10%4 (APA), then the difference in the monthyy payment of the i5iyear mortoage and 30 -year morteplon will be 7(Note: Round the final vatue of any interest rate used to tour decimal places, ) It is likely that you wont like the prospect of paying more money each menth, but if you do take out a IS vear mortgage, you wir make far fewer payments and will pay a lot lest in interest. How much more tetal interest will you pay over the life of the loan if vou takt gut a 30-ysar mortegge instead of a 15 -year mortgage? Which of the following statements is not true about mortgages? The peyment aliocated toward principal in an amortired loan is the residual balanot-that is, the difference betieen total payment and the interest dive Morteages always have a fixxd neminat interest rate. The ending byance of an smartixed ioan contract eill be zeroi Mortpages are examples of amsitized leans

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