Jane bought her house on December 31 and took a $10,000 mortgage (is an annuity) as part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jane must report on her Tax Form the amount of annual interest payment that is included in her first two payments during the year.
a. How much interest is included in the first payment? How much principal is included?
b. How much annual interest payment for Jane in the first year (the first two payments in total)?
c. The payment (PMT) is constant each time, why does the amount of interest payment change over time?