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August 9th, 2011, 09:52 AM   #1
Joined: Aug 2011

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Financial Math Question (I think this is in the right spot)

First off, thank you Math Forum community! You have helped me many time in understanding a topic just by reading the detail and depth of the answers provided.

Here is my question:
The Stuart family buys a Salt Spring island home for $350,000. After making a down payment of 20%, they finance the purchase with a 25-year mortgage whose nominal annual interest rate is 4%, compounded semi-annually with monthly payments made at the end of the month. After 10 years, they reciefve an inheritance of $300,000, using some of it to pay off the outstanding home loan completely and investing the rest for 5 years at a nominal annual interest rate of 2% compounded continuously.

a) What is the annual interest rate 4, compounded monthly, that is equivalent to the mortgage interest rate? (I think this is 3.97% right?)

b) How much is the family's monthly mortgage payment R?

c) How much of the inheritance did the family use to pay off the outstanding home loan?

d) How much interest did the family ear on its investment of the rest of the inheritance.
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