Problem:
Determine the annual repayment schedule for the first two years (i.e. interest, principal payment, and balance owed) for each of the following. (Assume that only one payment is made annually.)
Required:
Compare the payments required by each mortgage. What conclusions can you draw?
a) A $100,000 conventional mortgage for 25 years at 5 percent
b) A $100,000 conventional mortgage for 20 years at 5 percent
c) A $100,000 conventional mortgage for 25 years at 6 percent
Note: Show all workings.