Prime Mortgage Company sanctions a loan application for a 30 year mortgage loan for US$100,000. The interest rate on the loan is 12% per annum and the borrower is required to make equated monthly payments to repay the loan in 30 years (360 months). If the market rate of interest goes down to 9% per annum, is the loan still worth US$100,000? Why? Why not? (5 points)

b) If the corn farmer in the example above harvests 60,000 bushels, what amount will he receive? What if he had not hedged his position? If the corn farmer in the example is able to harvest only 40,000 bushels and the price per bushel rises to US$3.90 due to short supply of corn, will his exposure be completely hedged? Why? Why not? Support your answer with calculations. (5 points)