Jane financed her home purchase with a fully amortising fixed-rate 30-year mortgage at 4.25%. The original loan balance was P120,000.
(i) What is Jane’s minimum monthly payment?
(ii) Jane paid P700 per month for one and a half years. Jane is now trying to refinance. What is the principal remaining on her mortgage?
(iii) Discuss the different approaches for modelling prepayment option of individual fixed-rate mortgages.
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