A borrower secures a $300,000, 15-year adjustable rate mortgage (ARM) with an initial interest rate of 2%. Payments are monthly. The interest rate will reset in two years and remain at that level for the remainder of the mortgage. Assume a reset rate of 5%.

a. What are the initial payment, the initial loan balance, and the reset payment? (5 Points)

b. What is the yield on the loan? What is the yield if the lender charges 4 points? (5 Points)