Asked by Destiney Riley on Jun 10, 2024
Verified
Camille can obtain a residential mortgage loan from a bank at 8.75% compounded semiannually or from an independent mortgage broker at 8.6% compounded monthly. Which source should she pick if other terms and conditions of the loan are the same? Present calculations that support your answer.
Compounded Semiannually
The process of computing interest twice yearly and adding it to the principal sum, affecting the total amount earned or paid.
Residential Mortgage Loan
A loan secured by real property, typically a residential property, where the borrower is obliged to pay back with a predetermined set of payments.
- Evaluate the financial implications of different mortgage options.
- Gain proficiency in computing effective interest rates for diverse compounding intervals.
- Compute similar interest rates for various compounding durations.
Verified Answer
PM
Pranav MoholkarJun 15, 2024
Final Answer :
Camille should take the bank mortgage since its effective interest rate is lower.
Learning Objectives
- Evaluate the financial implications of different mortgage options.
- Gain proficiency in computing effective interest rates for diverse compounding intervals.
- Compute similar interest rates for various compounding durations.