Ann buys a property that costs $1,000,000.

She finances the purchase with a 70% LTV mortgage.

She gets a 20 year interest-only fixed-rate mortgage at an annual interest rate of 5%, with annual compounding and annual payments.

Ann must pay 2 points upfront in mortgage closing costs (as a % of the loan amount).

The loan has a 5/4/3/2/1 prepayment penalty structure (she must pay a 5% penalty if she prepays at any time in the first year, 4% penalty in the second year etc).

Suppose Ann will sell the property in 3 years, after her 3^rdyear's mortgage payment and pay off the balance when she sells.Find the IRR of Ann's mortgage.