7 Mortgage Problems. Questions Are Below and Also Attached. Must Show Work.

Assume the prevailing spot rates are as followings: r₁.0 %, r₂.5%, r₃.5%, .5%. Calculate ₁F₁, ₂F₁, ₂F₂.Loan Amount = $200,000; Monthly PaymentsSuppose PLAM mortgage with the following characteristics:

Mortgage Amount: $150,000

What is the payment in the first years, second year and third year? answer: $876.89, $894.42, $921.26

• What is the effective cost if the loan is repaid at the end of year 3 and the lender charges 2 discount points up front? answer: 8.56%

• Consider the following price and yield data:
• Initial yield: 10.00%
• Price: 105.125
• Revised yield: 10.25%
• Revised price: 104.25

Calculate Duration and Macaulay duration

• Suppose you take a 3/1 interest-only ARM for $120,000, monthly payments, 30-year term. The initial contract rate is 4.00% and the contract rate for year 4 is 6.00%. The lender charges two discount points. Questions
• What is the monthly payment for the interest-only period?
• What is the effective cost of the loan if it is repaid at the end of year 3?
• What is the monthly payment for year 4?
• What is the balance of the loan at the end of year 4?
• If the loan is repaid at the end of year 4, what is the effective cost?

Bill had a standard mortgage with principle of $80,000 created 5 years ago. The mortgage rate is 7%. Currently he can receive a rate of 3.8% with 2 discount points. To prepay the original mortgage, he needs to pay 3% penalty. Total return calculation

Tom bought the above mortgage after it was issued for 3 year. The price was the balance. He received a return of 6.5% in the reinvestment of the mortgage payment. After 5 years, he sold this mortgage at the market rate of 5%. Ignoring all cost, calculate the total return of Tom?s investment.