James King bought a house three years ago that cost $750,000. James put up 20% deposit and...

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James King bought ahouse three years ago that cost $750,000. James put up 20% depositand borrowed the rest from FC Bank at a rate of 7.2% per annum,compounded monthly, for 10 years.
Three months ago, FCBank notified James that after the last monthly payment for thethird year, the interest rate on his loan will increase to 9.6% perannum, compounded monthly, in line with market rates. Also, fromthe fourth year of his loan James can either increase the monthlyrepayment (so as to pay off the loan by the originally agreeddate), or he can keep paying the same original monthly repaymentand extend the term of the loan.
Calculate the new monthly repayment if James pays off the loanby the originally agreeddate.
Calculate the extra period added to the term of the loan, ifJames keeps on paying the original monthly repayment.

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a Total cost 750000 Downpayment 20 Mortgage amount 750000120 600000 Annual interest rate 72 so monthly rate 7212 060 Duration 10 years or 1012 120 payments Monthly payment IY 060 N 120 PV 600000 solve for PMT PMT 702851 Loan amortization schedule for 3 years a b c 06a d ac e bd Number of payments Monthly payment Beg Principal Interest Principal End Principal 1 702851 60000000 360000 342851 59657149 2 702851 59657149 357943 344908 59312240 3 702851 59312240 355873 346978 See Answer

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Transcribed Image Text

James King bought ahouse three years ago that cost $750,000. James put up 20% depositand borrowed the rest from FC Bank at a rate of 7.2% per annum,compounded monthly, for 10 years.Three months ago, FCBank notified James that after the last monthly payment for thethird year, the interest rate on his loan will increase to 9.6% perannum, compounded monthly, in line with market rates. Also, fromthe fourth year of his loan James can either increase the monthlyrepayment (so as to pay off the loan by the originally agreeddate), or he can keep paying the same original monthly repaymentand extend the term of the loan.Calculate the new monthly repayment if James pays off the loanby the originally agreeddate.Calculate the extra period added to the term of the loan, ifJames keeps on paying the original monthly repayment.