According to the Federal Interest Act, how can mortgages compound interest?

The Federal Interest Act provides guidance on how interest can be compounded in the context of mortgages, and the correct option reflects the legal framework surrounding the compounding of interest.

When we discuss compounding interest in mortgages, it's important to understand the timeframes and the method of compounding. The correct answer indicates that interest on a mortgage can be compounded weekly without requiring it to be paid in advance. This means that the interest is calculated and added to the principal on a weekly basis but is not charged until the due dates specified in the mortgage agreement are reached.

This method is beneficial for borrowers as it can potentially lower the overall interest paid over the life of the loan compared to less frequent compounding periods, as the more frequently interest is compounded, the more interest accrues on the principal.

In contrast, the other options refer to compounding interest methods that either involve monthly compounding or compounding in advance, which may not align with the specific terms outlined in the Federal Interest Act for mortgage arrangements. The Act specifically allows for certain flexibility in the calculation and application of interest, but it establishes parameters that are crucial for the proper understanding and management of mortgages in Canada.