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Amortizing a MortgageThe following is an example of mortgage being repaid over 15 years.Mortgages are more complicated than simple annuities. Since the payment period and compounding period are different, we cannot calculate the monthly payment on a mortgage by using the formula for the present value of an ordinary simple annuity.Mortgage payments can be calculated with a TMV solver. However, these days it is much simpler to use an online calculator, for example, Scotiabank an online calculator, determine the following for a mortgage of $210 000 at 5% per year compounded semi-annually for 25 yearsa) What is the monthly payment?b) What is the total amount paid for the home at the end of 25 years?c) What is the total interest paid over the 25 years?00a) How much interest and principal is paid in the 5th payment? How much is still owed after this payment?b) What is the outstanding balance after 6 months?c) Compare the interest and principal paid in the first 6 months of the mortgage with the interest and principal paid in the last 6 months of the mortgage. What do you notice?d) Why is the monthly payment increased for the 300th payment?e) What percent of the total amount paid is interest?Some important points regarding mortgages:? Although the monthly payments are equal, the split between interest and principal changes with each payment.? With each payment, the outstanding balance on the mortgage decreases. So, the part of each payment that covers interest decreases.? As the portion of each payment that covers interest decreases, the part that repays principal increases.Visit realtor.ca and look up some housing prices in Ottawa. Look at a few different areas of the city and choose house to buy! Calculate monthly mortgage payments for each house (use a 5% interest rate). Calculate the amount of interest paid for each house. ................
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