Question

In the lecture notes, we assumed the APR on a 30-year mortgage was 4%. This APRis close to the actual interest rate for a loan today and is near an

all-time low. Calculate the monthly payment (i.e., principal and interest only) on a $250,000, 30-yearmortgage if the APR is (a) 4%, (b) 8%, and (c) 14%. Comment on how you think changes in the 30-year mortgage APR between 1980 (APR = 14%) and 2017 (APR =4%) affected the housing market.

Fig: 1