A. Sam bought a house that costs $500,000. Sam got a 95% LTV loan. The lender demanded that Sam buy private mortgage insurance to insure the portion of the loan over 75% LTV. Suppose 5 years later, Sams mortgage balance is $400,000. However Sam defaults and his house sells for $220,000 in a foreclosure auction. How much will the mortgage insurance company pay Sams lender?

B. Jill buys a house for $900k, lives there for exactly 10 years and sells it. Suppose Jills annual cost of ownership is exactly equal to the annual rent she would have paid to live in the same house. Suppose the price of Jills house grows 3.4% annually. Buying expenses are 5% of purchase price and selling expenses are 8% of sale price. Compute Jills annual IRR from owning net of renting. (hint: look at the buy vs rent slides, assume no mortgage.)