3. Balloon fixed rate mortgage (8pts): Consider a balloon payment mortgage with the following terms: - Mortgage Rate: 6.00\% - Payment frequency: monthly (12 payments per year) - Mortgage Amount: $15,000,000.00 - Balloon Maturity: 5 years - Amortization Term: 30 years A. What is the beginning balance in period 56 ? B. What is the principal payment in period 56 ? C. What is the interest payment in period 56 ? D. What is the total payment in period 56 ? E. What is the ending balance in period 56 ? F. What is the principal payment in period 60? G. What is the total payment in period 60 ? H. Assume an annual discount rate of 6% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? I. Assume an annual discount rate of 10% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? J. Assume an annual discount rate of 4% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? K. Assume that you observe a price for the mortgage as a percentage of par in the marketplace of 101.50%. i. What is the implied annual discount rate for this mortgage in the marketplace? (Hint: you could use Solver) ii. For that rate you solved for in K.i., assume further that the corresponding annual risk free rate for this instrument is 2%; then answer: a. What is the implied risk premium (spread) in percent? b. What is the implied risk premium (spread) in basis points (bps)? L. Assume your firm's required rate of return for this mortgage is 12% but you observe the market price anc corresponding (solved) annual discount rate (yield to maturity) in K.i; then answer: i. What would be the NPV (\$) from your firm's perspective for this mortgage investment? ii. Should your firm invest? 3. Balloon fixed rate mortgage (8pts): Consider a balloon payment mortgage with the following terms: - Mortgage Rate: 6.00\% - Payment frequency: monthly (12 payments per year) - Mortgage Amount: $15,000,000.00 - Balloon Maturity: 5 years - Amortization Term: 30 years A. What is the beginning balance in period 56 ? B. What is the principal payment in period 56 ? C. What is the interest payment in period 56 ? D. What is the total payment in period 56 ? E. What is the ending balance in period 56 ? F. What is the principal payment in period 60? G. What is the total payment in period 60 ? H. Assume an annual discount rate of 6% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? I. Assume an annual discount rate of 10% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? J. Assume an annual discount rate of 4% : i. What is the dollar price of the mortgage? ii. What price of the mortgage as a percentage of par? K. Assume that you observe a price for the mortgage as a percentage of par in the marketplace of 101.50%. i. What is the implied annual discount rate for this mortgage in the marketplace? (Hint: you could use Solver) ii. For that rate you solved for in K.i., assume further that the corresponding annual risk free rate for this instrument is 2%; then answer: a. What is the implied risk premium (spread) in percent? b. What is the implied risk premium (spread) in basis points (bps)? L. Assume your firm's required rate of return for this mortgage is 12% but you observe the market price anc corresponding (solved) annual discount rate (yield to maturity) in K.i; then answer: i. What would be the NPV (\$) from your firm's perspective for this mortgage investment? ii. Should your firm invest
