Mortgages Are Annuities in That a Fixed Monthly Payment Is

Multiple Choice

Mortgages are annuities in that a fixed monthly payment is made to the lender (assume end of month payments and an interest rate that compounds semi-annually) .Sara is planning to take on a mortgage of $100 000 and believes she can afford monthly payments up to $700.How much interest would she save if she decided to pay off her mortgage over 20 years,rather than over 25 years? Her mortgage is at five percent interest calculated semi-annually.

A) $42 000
B) $18 120
C) $34 896
D) $16 776