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Compute the present values of all the payments need

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Reference no: EM132755439

Problem 1: You are deciding between the fixed-rate mortgage (FRM) described in part (a) above and the interest-only mortgage (IO) described in part (b) above. You expect to sell your home and to move after 10 years (i.e., immediately after making the 120th payment). Your opportunity cost of capital is 4.8% (APR with monthly compounding). Compute the present values of all the payments you need to make to the mortgage company for each of the two mortgages. Which mortgage should you choose based on the present values?

Reference no: EM132755439

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