Would you expect the mortagage payment to double

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Reference no: EM13263557

Assume a 20-year mortgage loan of $100,000 and an interest rate (APR) of 12%. What is the amount of the monthly payment? Check that you get the same answer when using the annuity formula. Now look at how much of the first month's payment goes to reduce the size of the mortgage. How much of the payment by the tenth year? Can you explain why the figure changes? If the interest rate doubles, would you expect the mortagage payment to double?

Reference no: EM13263557

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