A Demand (Variable Rate) Mortgage of $137 000

question 34

Essay

A demand (variable rate) mortgage of $137 000.00 is amortized over 20 years by equal monthly payments. After 21 months the original interest rate of 6% p.a was raised to 6.6% p.a. Three years after the mortgage was taken out, it was renewed at the request for the mortgagor for a five-year term at a fixed rate of 7.25% p.a.
a) Calculate the mortgage balance after 21 months.
b) Compute the size of the new monthly payment at the 6.6% rate of interest.
c) Determine the mortgage balance at the end of the five-year term.

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Definitions:

ROM Chips

Non-volatile memory chips that permanently store instructions for computing devices; ROM stands for Read-Only Memory.

Virtual Memory

A memory management capability of an operating system that uses hardware and software to allow a computer to compensate for physical memory shortages, temporarily transferring data from RAM to disk storage.

RAM Modules

Physical hardware components where Random Access Memory (RAM) is stored, allowing computers to access data quickly for active processes.

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A personal or professional computing device designed to fit on a desk, typically consisting of a monitor, keyboard, mouse, and tower or integrated case.