A new office building was constructed years ago by a consulting
engineering firm. At that time the firm obtained a bank loan for $
with a annual interest rate, compounded quarterly. The
loan terms call for equal quarterly payments for years. The loan
also allows for its prepayment at any time without penalty. The firm
proposes to refinance the loan through an insurance company. The
new loan would be for a year term with an interest rate of per
year, compounded quarterly. The insurance company requires the
payment of a loan initiation charge often described as a
point loan fee" which will be added to the starting balance. a
What is the balance due on the original mortgage if payments have
been made?
b What is the difference between the old and new quarterly
payments?
