1. Suppose you agreed to purchase a house for $100,000. In your loan application you requested a loan-to-value ratio of 90%. The mortgage contract calls for an interest rate of 6%, 20-year term, and amortization period of 30 years. In addition, the lender charges 5 points, which is deducted upfront. You also spend $500 renovating the house. USE THE ABOVE INFORMATION TO ANSWER Part (21a), (21b), (21c)

(21a) Calculate the (1) face value of loan, (2) the actual loan amount advanced by (lender, and (3) total amount of equity you need to invest in the house (6 points)

(21b) Calculate the monthly payment and mortgage balance at end of 5^th year mortgage (5 points)

(21 c) Now assume you prepay the loan at end of 5^th year, calculate the annual percentage rate (APR), effective interest rate (EIR), effective Annualized Yield (EAY) and the bond equivalent yield (BEY). In the case of BEY assume bonds in the capital markets pay coupon quarterly rather than semiannually (7 points)

(22d) Assume you are at the end of year 5 and market interest rate for mortgage of similar risk is 4%. First calculate the market value of the loan, and then capital gain or loss incurred by the lender. 6 points)