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You decide to take a 30-year mortgage of $160,000 offered by the Bank of Montreal
You decide to take a 30-year mortgage of $160,000 offered by the Bank of Montreal. Instead of making the monthly payment of $918.91 every month, you can make half the payment every two weeks (so that you will make 52 ÷ 2 = 26 payments a year). How long will it take to pay off the mortgage if the EAR on the loan is 5.75%? (Note: Be careful not to round any intermediate steps less than six decimal places.)
The amount of time to pay off the loan is
weeks. (Round to the nearest integer.)
Expert Solution
Computation of Number of Weeks it will take to pay off the mortgage:
Biweekly Payment = $918.91*1/2 = $459.455
Biweekly Interest rate = (1+5.75%)^(1/26)-1
Biweekly Interest rate = 0.215261%
No of Biweekly Periods = nper(rate,pmt,pv,fv)
No of Biweekly Periods = nper(0.215261%,459.455,-160000,0)
No of Biweekly Periods = 643.99 or 644
No of year it will take to pay off the mortgage = No. of Biweekly / Biweekly in a year
No of year it will take to pay off the mortgage = 644/26
No. of year it will take to pay off the mortgage = 24.77 Years
Number of Weeks it will take to pay off the mortgage = 24.77*52 = 1,287.99 weeks or 1,288 weeks
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