1) A borrower takes out an interest-only loan at 6% for $1,000,000 with a 10 year term. What is the monthly payment on this loan? (State your answer as a positive number, rounded to two decimal places.)

2) A borrower is interested in comparing the monthly payments on two otherwise equivalent 30 year FRMs. Both loans are for $100,000 and have a 7% interest rate. Loan 1 is fully amortizing, where as Loan 2 has negative amortization with a $120,000 balloon payment due at the end of the life of the loan. How much higher is the monthly payment on loan 1 versus loan 2? (Hint: calculate both payments and take the difference. Only the future values of the loans are different.) Round your answer to two decimal places.

3)Given the following information, what is the borrower's payment during the 2nd year of the loan? (State your answer as a positive number, rounded to the nearest cent.)

A borrower is offered a 30 year, fully amortizing ARM with an initial rate of 3.2%

After the first year, the interest rate will adjust each year, using 1 yr LIBOR as the index, plus a margin of 175bp.

The price of the property is $8,000,000 and the loan will have an initial LTV ratio of 75%

At the first reset date, 1 year LIBOR is at 3%.

4) In general, would you expect for interest rates on junior/2nd liens to be higher or lower than interest rates on senior/1st lien loans? Why?

(1-2 sentences please.)

5) If everything else is equal (interest rates, terms, initial balance, etc.) which type of loan would have a higher initial payment, a constant payment mortgage (CPM) or a constant amortization mortgage (CAM)? Why?

(1-2 sentences, please.)

6) Order these loans from highest monthly payment to lowest monthly payment. (Enter 1 as your answer to designate loan with highest payment, 2 as loan with second highest payment, and so on up to 5 to designate loan with lowest payment)

Each of the following loans is for $300,000 and is a fixed rate mortgage with a 3.5% interest rate

- Interest-only payments for the life of the loan Blank

- Balloon payment of $500,000 is due at maturity Blank

- The loan is fully repaid at maturity Blank

- Balloon payment of $250,000 is due at maturity Blank

- Balloon payment of $100,000 is due at maturity