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Suppose Estate Management Office has applied for a $1200000 loan to purchase school bus. The mortgage will be amortized over 25 years with monthly payments based on a nominal rate of 7.2% compounded monthly. You may use i = 0.072/12. (i) What is the monthly payment of the mortgage? (ii) Find the outstanding principal of the loan after paying the 130th payment. (iii) Show the amortization schedule entries for the 131st and 132nd payments. (iv) Suppose that the nominal interest rate of the loan is changed to 3.45% after the 132nd payment is made. Using results from (iii) to compute the amount of the new monthly payment. You may use i = 0.0345/12.
(b) On Bob’s 25th birthday, he began depositing $1000 at the end of each month into an investment account that pays interest at a nominal rate of 9% compounded monthly, eight years after Bob opened his account, his twin, Edmond, began making deposits to her investment account that pays interest at the same rate. If Bob and Edmond have the same amount of money on their accounts on their 70th birthday, how much does Edmond need to deposit into his account each month? You may use i = 0.09/12.