Suppose a homeowner is evaluating two mortgages, both of which are arrangements for repaying a loan of $200,000. Mortgage A requires quarterly payments at the end of each quarter for 15 years at a stated annual rate of 5%. Mortgage B has quarterly payments, paid at the beginning of each quarter for 18 years, at a stated annual rate of 5.5%. Mortgage A has a higher periodic payment than Mortgage

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Mortgage A, with a shorter term and the same interest rate basis (quarterly), will have higher periodic payments than Mortgage B, despite Mortgage B's slightly higher interest rate, because the loan is amortized over a shorter period.

Suppose a Homeowner Is Evaluating Two Mortgages, Both of Which