A floating rate mortgage loan is made for
$200,000
for a 30 -year period at an initial rate of 12 percent interest. However, the borrower and lender have negotiated a monthly payment of
$1,600
.
Required:
a. What will be the loan balance at the end of year 1 ?
b. What will be the loan balance at the end of year 2? If the interest rate increases to 13 percent at the end of year 2 and the payment remains at
$1,600
, how much is the total interest (mortgage payment plus negative amortization) in year 2 and total interest (mortgage payment plus negative amortization) in years 2 to 5 ?
Complete this question by entering your answers in the tabs below.
Required
A
Required B
What will be the loan balance at the end of year 2? If the interest rate increases to 13 percent at the end of year 2 and the payment remains at
$1,600
, how much is the total interest (mortgage payment plus negative amortization) in year 2 and total interest (mortgage payment plus negative amortization) in years 2 to 5 ?
Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar.
Show less
Loan balance in year 2
Total interest - Year 2
Total interest - Years 2 to 5