Show all your work in solving the problems. You don't need to provide formulas but do need to show all calculator keystrokes to get full credit for your answers. Each problem is worth 20 points. 1. A borrower can get a mortgage for $400,000 over 30 years with the following terms: a. Initial interest rate = 4% b. Index = 1 year Treasuries c. Payments adjusted annually d. Margin = 2% e. Negative amortization = yes f. Based on forward rates the index is forecasted as follows: Beginning of year BOY2=3%, BOY3=5%, BOY4=6%, BOY5=8% Compute the payments, loan balances, and the cost of borrowing over the 5- year period 2. You currently have a mortgage for $300,000 at 7% for 30 years. Mortgage rates have fallen, and you are thinking about refinancing after 10 years. You find a good deal online for a new 20-year loan at 6% with closing costs of $4,000. Should you refinance if you plan to be in the home no more than five more years? An alternative investment option would earn you 10%. 3. A local lender originated a mortgage 3 years ago, but today they would like to sell it to another financial institution. The mortgage was for 30 years at 6% for $250,000. Current market rates are 4%. What is the book value of this loan? What is its market value? 4. What is the effective borrowing cost of the following mortgage financing package? $100,000 for 30 years at 6%. $200,000 for 20 years at 7%. $300,000 for 10 years at 8.5% 5. You want to buy a $400,000 home. You have two loan options: 90% loan for 20 years at 7%. 80% loan for 20 years at 6%. Find the incremental borrowing cost for the additional $40,000