What would be the annual debt service payment

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ABC Financial Corporation has agreed to give you a constant payment mortgage loan of $10 million for the purchase of a property. Per the terms of the loan, the mortgage constant is 8.72%; amortization term is 20 years; the term to maturity is 5 years; interest rate is 6% and is compounded annually, and the debt service payments are due once a year at the end of the year.

Problem 1: If the loan were an interest-only loan, "A" wants to know what would be the annual debt service payment? Show your calculations.

(a) $540,000

(b) $600,000

(c) $872,000

(d) $740,000

Reference no: EM132937485

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