A price level adjusted mortgage (PLAM) is made with the following: Loan=$200,000, interest rate =5%, 30 years term with 2 discount points. Payments to be reset at the beginning of each year. Loan balance will be adjusted according to home price. Assuming home price is expected to grow 3% per year for the next 3 years:

1. monthly payment for year 1?

2. monthly payment for year 2?

3. what is the effective cost for borrower for the 2 years period?