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The Walkers Have a Mortgage of 189000 Amortized over 25 Years at 6.7% Compounded I Biweekly with a 4-year Term. The Mortgage Is Renewed

Question

The Walkers have a mortgage of 189000 amortized over 25 years at 6.7% compounded I biweekly with a 4-year term. The mortgage is renewed for another 4-year term at 8.9% compounded biweekly . Determine the new monthly payment.

Solution

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Answer

### $1242.56

Explanation

## Step 1: Calculate the bi-weekly interest rate for the first term.### The annual interest rate is 6.7%, and it is compounded biweekly (26 times a year). Therefore, the bi-weekly interest rate is .## Step 2: Calculate the number of payments in the first term.### The first term is 4 years, and there are 26 bi-weekly payments per year. So, the total number of payments in the first term is .## Step 3: Calculate the bi-weekly payment for the first term.### Using the formula for mortgage payment: , where , , and (total payments over 25 years). .## Step 4: Calculate the outstanding balance after the first term.### The outstanding balance can be calculated using the formula: , where (number of payments in the first term). .## Step 5: Calculate the bi-weekly interest rate for the second term.### The annual interest rate for the second term is 8.9%, compounded biweekly. The bi-weekly interest rate is .## Step 6: Calculate the number of payments remaining after the first term.### Since the amortization period is 25 years, and the first term is 4 years, there are years remaining. The number of bi-weekly payments remaining is .## Step 7: Calculate the bi-weekly payment for the second term.### Using the mortgage payment formula with the new interest rate and remaining balance: .## Step 8: Calculate the new monthly payment.### Since there are approximately 26 bi-weekly payments in a year, and 12 months in a year, the monthly payment is approximately .