Evaluate outstanding balance, Cost Accounting

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Winston Duff is planning to borrow $225,000 to purchase a new home. Mr. Duff is considering two fixed-rate financing alternatives offered by Horsepen Creek State Bank. The first financing option is a 25-year mortgage with a fixed yearly interest rate of 7.8 percent. The second financing option is a 15-year mortgage with a fixed yearly interest rate of 6.0 percent. Assuming that the interest rates on the respective mortgages remain fixed for the term of the loan, and that both mortgages require Mr. Duff to make monthly payments

a. Compare the monthly payments for the 15-year mortgage with the monthly payments required on the 25-year mortgage

b. Compare the outstanding balance of Mr. Duff's loan after five years of monthly payments on each of the respective mortgages.


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