11. Ann wants to buy an office building which costs $1,000,000. She obtains a 10 year interest only mortgage with 70% LTV, an annual interest rate of 4%, with annual payments. Ann makes no payments for the first two years and prepays the accumulated balance (including the late fees) at the end for the third year. Due to two missed payments, the bank applied two late fees. Each fee is calculated the following way: if there is no payment in year t, then the balance in year (t+1) reflects not only the missing payment but also an additional 5% of the mortgage balance at the beginning of year t. What is the IRR on Ann's mortgage