We take a? 10-year mortgage for ?$300,000 at 7.75?% p.a. It is to be repaid in monthly repayments. ?
(a) What is the repayment? amount? Assume that interest is compounded monthly. Which formula should you use to solve this? problem? ?
(b) What is the balance outstanding after two? years? How much principal and how much interest have been? paid? ?
(c) After two? years, the interest rate falls to 7.25?% p.a. What prepayment penalty would make it unattractive to prepay the? loan?