NEEDS TO BE DONE IN EXCEL WITH CALCULATIONS.

MakeNu mortgage company is offering a new mortgage instrument called the stable mortgage. This mortgage is composed of both a fixed rate and an adjustable rate component. Mrs. Maria Perez is interested in in financing a property, which costs 100,000 and is to be financed by Stable Home Mortgages( SHM) on the following terms: a. The SHM requires a 5 percent down payment, costs the borrower 2 discount points, and allows 75 percent of the mortgage to be fixed and 25 percent to be adjustable. The fixed portion of the loan is for 30 years at an annual interest rate of 10.5 percent. Having neither an interest rate nor payment cap, the adjustable portion is also for 30 years with the following terms.

Initial interest rate = 9 percent

Index= one year treasuries

Payments reset each year

Margin= 2 percent

Interest rate cap= none

Payment cap= none

The projected one year U.S. Treasury bill index to which the ARM is tied, is as follows: (BOY) 2= 10 percent; (BOY) 3= 11 percent; (BOY) 4= 8 percent; (BOY) 5 = 12 Percent Calculate Mrs. Perez's total monthly payments and end of year loan balances for the first five years. Calculate the lenders yield, assuming Mrs. Perez repays the loan after five years. b. Repeat part (a) under the assumption that the initial interest rate is 9.5 percent and there is an annual interest rate cap of 1 percent.