A mortgage loan in the amount of $100,000 is made at 12 percent interest for 20 years. Payments are to be monthly in each part of this problem.

1. What will monthly payments be if The loan is fully amortizing?(0.5/. )

2. What will the loan balance be at the end of year 5 (0.5/. )

3. What would be the interest portion of the payment scheduled for payment at the end of the 2nd month (0.5/. )

4. If the loan is prepaid at the end of year 5, what will be the effective rate of interest (0.5/. )

5. Assume conditions in a (1) except that payments will be interest only for the first 3 years

(36 months). If the loan is to fully amortize over the remaining 17 years, what must the

monthly payments be from year 4 through year 20 (1/. )

An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate 7 percent

Index 1-year Treasuries

Payments reset each year

Interest rate cap None

Payment cap 5 percent increase in any year

Fully amortizing; however, negative amortization allowed if payment cap reached

Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2= 7 percent; (BOY) 3= 9.5 percent

Compute the following

a-payments

b- loan balance EOY1

c- payment EOY1

d-loan balance EOY2

e- payment EOY2

based on E how much will the borrower be paying