A homebuyer takes-out a fully amortizing loan in the amount of $1,200,000 for a term of 30 years at 6% APR, compounded monthly. Assume that there are no pre-payment penalties.

(a) What are the monthly mortgage payments the homebuyer must make to the lender?

(b) What is the outstanding balance of the loan at the end of 10 years?

(c) At the end of year 10, the market rate of interest is 4%. What is the market value of the loan at the end of 10 years?

(d) If the loan is sold at market value at the end of year 10, is this loan sold at a discount?

(e) Regardless of what your answer is for part (d), what is one reason why the mortgage lender would sell the loan at a discount?