1. Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage with 80% LTV, an annual interest rate of 4%, with monthly compounding and monthly payments.

The mortgage has a 2% prepayment penalty if the borrower prepays in the first 5 years. Suppose Ann makes the required monthly payment for 3 years and prepays after her final monthly payment at the end of 3 years. What is the annualized IRR on Anns mortgage?

	A.	4.00%
	B.	0.38%
	C.	5.73%
	D.	4.60%

2. Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 5.5% compounded monthly, with monthly payments.

After 5 years of payments, Ann can refinance the balance into a 25 year Fully Amortizing FRM at an annual interest rate of 4.75% compounded monthly, with monthly payments. Refinancing will cost Ann 1 point and $1,500 in closing costs. If Ann refinances into this loan and makes payments for 25 years, what will be her annualized IRR from refinancing?