QUESTION ONE

a$)$ A mortgage loan in the amount of Kshs $50,000,000$ is made at $12$ percent interest for $20$ years. Payments are to be monthly in each part of this problem.

Present a brief financial evaluation report on the mortgage loan based on the following amortization schedules:

The toan is fully amortizing

It is a non$-$ amottizing, or "interest only," loan and,

The loan is partially amortizing

$(10$ marks$)$

b$)($i$)$ Explain why monthly payments in the beginning months of a CPM loan contain a higher proportion of interest than principal repayment? $(3$ marks$)$

c$)$ What is the difference between covariance and correlation? Why are these concepts so important in real estate portfolio analysis?

$(2$ marks$)$