Question 3: Mortgage Products [20 points] A young rsttime homebuyer is considering the purchase ofa HKSlU million property by taking out an 8-396 mortgage nancing with the following terms: Tenor: 25 years, monthly payments Mortgage interest rate: "Prime" minus 2.5% p.a., Prime Rate is 5%. Standard deposit savings rate: 0.1% p.a. Suppose the following fixedrate mortgage products are available for consideration. [1} Conventional fully amortized mortgage. [CPM] [2} Growing equity with a 4% increase in the monthly mortgage payments each year. {GEM} [3} Biweekly mortgage [BWM] [4} Graduated payment mortgage with three 5year steps {3 jumps} and 3% stepup rate before the monthly payments level off. [6PM]: [5} Depositlinked mortgage with savings deposit of HKSSUU,DUD required, deposit interest rate equal to prime minus 2.5% p.a. subject to the 5% cap provision. {DLM} [a] Fill in the following table. {15 points} Mortgage Monthly Mortgage Payments Payback Period {'r'ears) Total Interest Expense [1St month} CPM GEM [b] What are the pros and cons of each of the mortgage products in la}? {5 points}