Suppose you are considering a PLAM with the following characteristics: Mortgage Amount = $300,000

30-Year Term Monthly Payments

Current Real Rate = 5.00 percent Expected Inflation Rates: EOY1 = 4%, EOY2 = - 4% Annual Payment Adjustments

A. (1 pt) What is the monthly payment for year 2?

Answer __________

(1pt)Whatistheeffectivecostiftheloanisrepaidattheendofyear2? Answer __________

(1 pt) Suppose that, instead of repaying the loan, you continue to make the payments and your monthly payment in year 4 is $1,656.12. What was the inflation rate for year

three?

Answer __________