PART A- If the loans are priced competitively, which loan should have the lowest initial interest rate?

a. Loan 1

b. Loan 2

c. Loan 3

d. Loan 4

PART B- Which loan is a FRM?

a. Loan 1

b. Loan 2

c. Loan 3

d. Loan 4

PART C- With which loan is the lender least exposed to interest rate risk?

a. Loan 1

b. Loan 2

c. Loan 3

d. Loan 4

1%/year | 3%/year Use the following to answer the next 3 questions: Item Loan 1 Loan 2 Initial Interest Rate ? ? Loan Maturity (years) 20 20 Adjustment Interval 1 no adjust. Points Interest Rate Cap Loan 3 ? 20 Loan 4 ? 20 1 1 1 None 0 1%/year | 3%/year Use the following to answer the next 3 questions: Item Loan 1 Loan 2 Initial Interest Rate ? ? Loan Maturity (years) 20 20 Adjustment Interval 1 no adjust. Points Interest Rate Cap Loan 3 ? 20 Loan 4 ? 20 1 1 1 None 0