Asked by BHUVANA SUNDAR on Apr 29, 2024
Verified
A $100,000 mortgage at 6.75% compounded semi-annually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to miss a payment once each year. How much will the amortization period be lengthened if the borrower misses the ninth payment? (The interest that accrues during the ninth month is converted to principal at the end of the ninth month.)
Compounded Semi-annually
The process of calculating interest on both the initial principal and the accumulated interest from previous periods, applied twice a year.
Amortization Period
Refers to the total time taken to pay off a debt in regular installments until the loan amount and interest are paid in full.
- Gain an understanding of the consequences that changes in the term length, interest rate variations, and refinancing actions have on the amortization period.
Verified Answer
JG
Learning Objectives
- Gain an understanding of the consequences that changes in the term length, interest rate variations, and refinancing actions have on the amortization period.