A $100,000 mortgage at 7.2% compounded semi-annually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to prepay up to 10% of the original principal once each year. How much will the amortization period be shortened if, on the first anniversary of the mortgage, the borrower makes (in addition to the regular payment) a prepayment of:
a) $5,000? b) $10,000?

Question

Quizplus · Accepted Answer

The Answer of A $100,000 mortgage at 7.2% compounded semi-annually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to prepay up to 10% of the original principal once each year. How much will the amortization period be shortened if, on the first anniversary of the mortgage, the borrower makes (in addition to the regular payment) a prepayment of:
a) $5,000? b) $10,000?

A $100,000 Mortgage at 7