1. Use the information provided below to answer the questions that follow (assume no origination fee).

You are taking out a loan with the following terms:

Loan Amount: $225,000

Interest Rate: 4.5%

Loan Amortization: 30yrs

Discount Points: 1pt

3^rd Party Costs: $4,500

a. What is the monthly loan payment?

b. How much interest will you pay on your 1^st payment?

c. How much interest will you pay during the 1^st year?

d. What will your outstanding balance be at the end of 7 years?

e. What is the Lenders yield for this loan?

f. What is the APR/EBC for this loan?

g. What is the Lenders yield for this loan if you prepay at the end of the 7^th year?

h. What is the EBC for this loan if you prepay at the end of the 7^th year?

i. If you can refinance into a new 30 year loan in 7 years with an interest rate of 4% and total closing costs of $8,000, should you refinance according to the NPV rule (assuming you will hold the new loan until maturity)?

2. Given the following information for an adjustable rate mortgage which resets every 2 years, calculate the monthly payment for the 5^th and 6^th loan years (assuming no teaser rate or payment caps apply). Hint to get started: For years 1 to 2, the payment is for 360 months and the ending balance is for 336 months remaining [(30-2)*12=336].

Loan Amount	$180,000
Amort. (yrs)	30
Margin (bps)	225
Reset Frequency	Every 2yrs

Years	Index Rate	# Rem. PMTs	Beg. Balance	I/Y	PMT	End. Balance
1 to 2	2.00%
3 to 4	2.50%
5 to 6	3.50%