Your local bank has offered you a 20-year, $100,000 mortgage. The bank is charging 1.5 points and “processing” costs of $750; both points and processing costs are deducted from the mortgage when it is given. Payments on the mortgage are annual and are based on a 10% interest rate on the full amount of the mortgage (that is, $100,000).
a. Calculate the annual mortgage payment.
b. Calculate the EAIR.
c. Compute an amortization table that shows the amount of interest you can report for taxes each year.