3 Ann got a 10 year Fixed Rate Mortgage for $100,000.

The loan has constant annual payments and an annual interest rate of 5%.

The closing cost for the loan is $2,000 (paid at the time of origination, t=0).

Suppose Ann prepays the loan in year 4.

Write the NPV of Anns Mortgage (from Anns perspective) for an annual discount rate in each of the following cases.

Note: the answer must take the form

Note: only include one cash-flow for each time period

3a Fully Amortizing

3b Partially Amortizing where the final balance is

3c Interest Only

3d Negatively Amortizing where the payment is

3e Negatively Amortizing where the payment is

4 Compute the IRR for each loan above

4a

4b

4c

4d

4e

5 Do closing costs raise the IRR more for loans with greater amortization? (Yes or No)