Part 4: Fully amortized Variable rate mortgage 1. Assume that you know in advance (at the time of the mortgage initiation) the future prime rate at any point in time. According to you, the prime rate will be the following: - At mortgage initiation: 3.50% - 6 months after mortgage initiation: 3.75% - 10 months after mortgage initiation: 4.00% 2 - 21 months after mortgage initiation: 4.25% - 32 months after mortgage initiation: 4.50% - 52 months after mortgage initiation: 5.00% - 56 months after mortgage initiation: 5.50% From here on, the prime rate remains the same for the reminder time of the loan. 2. Create a monthly amortization schedule for a fully amortized $320K,15yr,2/1 hybrid ARM mortgage that charges a prime rate minus 1.0%. The original loan balance is 70% of the property's value when initiated, and the property is expected to appreciate at a rate of 2.5% annually. 3. What is the remaining loan balance at the end of the holding period if the property owner sells the property after 59 months? 4. Illustrate with a well-labeled graph the amount of equity the property owner builds throughout the holding period of the loan. 5. What is the owner equity in the property at the time the property is sold? 6. What is the NPV and IRR of this investment, if the property owner sells the property after 59 months