After reading the text’s example about Ron Cooke, the mortgage banker, you decide to enter the business. You begin small; you agree to provide \($300,000\) to an old college roommate to finance the purchase of her home. The loan is a 20-year loan and has a 10-percent interest rate. Ten percent is the current market rate of interest. For ease of computation, assume the mortgage payments are made annually. Your former roommate needs the money four months from today. You do not have \($300,000,\) but you intend to sell the mortgage to MAX Insurance Corp. The president of MAX is also an old friend, so you know with certainty that he will buy the mortgage. Unfortunately, he is unavailable to meet with you until three months from today.

a. What is your former roommate’s mortgage payment?

b. What is the most significant risk you face in this deal?

c. How can you hedge this risk?