Assume an elderly person owns a $$350,000$ home that is free and clear of mortgage debt. A lender has agreed to a $$350,000$ reverse mortgage with monthly payments. The loan term is $15$ years. The annual interest rate is $6\%.$

What is the interest charged in the $1$st month?

$$1,750$

$$1,550$

$$12\mathrm{.}07$

None of the above

What is the monthly payment to the elderly?

$$1,750$

$$1,550$

$$1,203\mathrm{.}50$

$$2,953\mathrm{.}50$

If the elderly passes away in $5$ years $(60$ months$),$ what will be the loan balance?

$$266,031\mathrm{.}85$

$$83,968\mathrm{.}15$

$$26,603\mathrm{.}19$

None of the above

How much of the loan balance at the end of $60$th month represents the interest portion?

$$1,338\mathrm{.}24$

$$93,241\mathrm{.}78$

$$11,758\mathrm{.}22$

None of the above

Suppose that there is $$2,000$ origination cost associated with the reverse mortgage and the elderly passes away in $5$ years $(60$ months$),$ what is the annual effective cost of the loan to the elderly?

$6\%$

$6\mathrm{.}3055\%$

$7\mathrm{.}3055\%$

None of the above