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MAT133Y5 (54)
Lecture

1. Mortgages

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Department
Mathematics
Course
MAT133Y5
Professor
Soheil Homayouni
Semester
Winter

Description
1MortgagesMortageloansarecommonlyquotedwithanominalratecompoundedsemiannuallybutthepaymentsaremonthlyTondthemonthlypaymentsinthiscaseonendstheeectivemonthlyrateofinterestLetrbethenominalratecompoundedsemiannuallyletibetheeectivemonthlyrateofinterestTondiintermsofrweequatetheeectiveannualrateofcompoundingsemiannuallywiththeeectiveannualrateofcompoundingmonthlyHence2r121i11122r121i121r61i121r61i12Example1Whatistheeectivemonthlyrateforamortgageifthenominalrateis12compoundedsemiannuallySolutionTaker12so16i1061000975879Notethattheeectivemonthlyrateof098islessthan1whichissimplythenominalratedividedbytwelveExample2Findthemonthlypaymentsfora25year50000mortgageat12compoundedasemiannuallybmonthlySolutionThemonthlypaymentforamortgageisgivenbyARainTakeA50000n2512300aTakei000975879SeeExample150000ThenRa30000097587951595bTakei15000052661ThenRa3000011
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