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ASSIGNMENT VERSION # 5
Assume that your group represents the Credit Manager of a North Vancouver Credit
Union and that Mr. Wayne Gretski, on his way through Vancouver to the 2022 Olympics,
has asked that you analyze the history of his previous and current mortgage transactions.
a) Exactly 10 years ago, Mr. Wayne Gretski purchased a beautiful condo at Whistler for
775,000 and made a down payment of $335,000. The balance was mortgaged at the
Canada Bank at 6.25% compounded semi-annually with monthly payments over 25
years. The interest rate was fixed for a 5 year term, and lump sum payments were
allowed at the end of each 5 years without penalty.
i) Calculate the monthly payment for the first 5 years. ROUND UP TO THE NEXT
ii) Construct an amortization schedule for the first 60 months. (A schedule
showing only the first 3 months, and months 57 to 60 inclusive, with 60 month
totals is also required.)
iii) Calculate the principal outstanding at the end of the first 5 years.
iv) What percentage of the first five years total monthly payments went to
reduction of the debt, and what percentage went to interest?
v) What percentage of the debt has been paid off by the first five years of
) Exactly five years ago, Wayne made a lump-sum payment of $160,000 (in addition to
the regular payment), and the interest rate was also changed to 5.45% compounded
i) Calculate the amount being refinanced.
ii) Calculate the monthly payment for the second 5 year period. ROUND UP TO
THE NEXT DOLLAR.
iii) How much total interest did Wayne pay in the past two years?
c) Wayne’s mortgage has just come up for further renewal. He has decided to take
advantage of your relatively low rates and wishes to investigate tranferring it to your
North Vancouver Credit Union branch that charges 5.10% compounded monthly,
payable over 15 years.
i) Calculate the size of the principal balance being refinanced.
ii) Calculate the size of the new monthly payment.
iii) Wayne seems amazed that he has only repaid a small fraction of his original
loan. You will draw a large scale, fully labelled graph that visually explains to
Wayne how the loan has been amortized over the past ten (10) years. You are
only expected to plot the annual balances owing.
This assignment is due Thursday, May 21. Late assignments will be
penalized 50% per day (or part thereof). Please keep a duplicate of
OPMT1110 MORTGAGE TERMS
Principal: The outstanding amount of the mortgage. When a purchaser first buys their house or
condominium, the principal of the mortgage would be the difference between the purchase price and
the down payment.
Down payment: The amount of money that the purchaser contributes to the purchase price.
Insured mortgage: If the down payment is less than twenty percent of the purchase price of the
property, so that the mortgage is more than eighty percent of the purchase price, then the mortgage is
considered higher risk and the purchaser must buy mortgage insurance.
Payment: The regular payments to pay off the mortgage. The payments are usually monthly.
Amortization period: The length of time to pay off the mortgage. This is usually twenty-five years for
residential properties such as houses or condominiums.
Term: The length of time during which the interest rate is fixed. This is usually from one to five years.
Closed term mortgage: If a mortgage with a closed term is paid off before the term completes, the
borrower must pay a
Open term mortgage: A mortgage with an open term can be paid off before the term completes with no
Lump sum payment: In addition to the regular mortgage payments, a borrower is allowed to make extra
payments to reduce the principal each time the term of the mortgage completes. Some mortgages also
allow the borrower to make small lump sum payments once per year before the term completes.