The problem set is located in the attached file. There are five questions and three of the five have different parts to them, such as a) b) c) etc.It is important that the work is shown to the problems in a logical manner (Hegives partial credit IF he can determine where you went wrong). In the written responses, more weight is placed on content and organization than on quantity. Thanks for your help!

UNIVERSITY OF MEMPHISFOGELMAN COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT OF FINANCE, INSURANCE AND REAL ESTATE FIR 4320 / 6320 Problem Set #1 Mark Sunderman In working this problem set pay close attention to the instructions on our class web site. Remember, even though you can gain help in the threads, this is still an individual assignment. This assignment does not need to be typed; however, it is very important that you organize your answers clearly and legibly. Since I give partial credit, it is imperative that you show your work in a logical manner. In any written response, remember that I place more weight on content and organization than I do on quantity. You can deliver this assignment to me by posting it the "Dropbox" for this unit - see top bar for the tab for the Dropbox. Attaching it as a file in an email to me is another possibility.1 After the due date, I will be posting the solutions on the web site, and once graded, I will be posting your grade in the grade book. If you would like me to return the problem set to you after I have graded it, please send me an e-mail with your mailing address you would like it sent. This problem set is worth 100 points (questions 1 is worth 20 points, questions 2 and 3 are each worth 30 points and questions 4 and 5 are worth 10 points each). . 1) You have been offered a GPM loan that is originated for $200,000 at 6 percent for 30 years. Payments are scheduled to graduate at the rate of 7.5 percent for the first five years of the loan. a. Compute the payments required for the first six years on the loan term. b. What would the payment be if a CPM loan was available instead of the GPM loan (6%, 30 years, monthly amortization). c. After 10 years what is the balance due on the GPM loan? 2) Mary Smith wants to buy a property for $275,000 and obtains an 80 percent loan. This loan can be obtained for 30 years at 5.75 percent interest (monthly payments) with two points charged on the loan. a. What dollar amount will the lender actually disburse? b. What is the monthly payment? c. How much interest is paid in year 4? d. Assume the lender imposes a prepayment penalty of 1 percent of the outstanding loan balance if the loan is repaid within the first eight years. If Doe repays the loan after five years, what is the effective interest cost? 3) Five years ago you borrowed $120,000 to finance the purchase of a $150,000 home. The interest rate on the old mortgage loan is 8 percent. Payments are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 5.5 percent with monthly payments for 30 years. The new lender will charge three discount points on the loan. Other refinancing costs will equal $4,000. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is 7 percent. d. What is the payment on the old loan? e. What is the current loan balance on the old loan (five years after origination)? f. What would be the monthly payment on the new loan? g. Should you refinance today if the new loan is expected to be outstanding for five years? Show calculations. 4) You are at retirement age and one of your benefit options is to accept a monthly annuity of $6,900 for 20 years. What lump sum settlement, if paid today, would have the same present value as the $6,900 monthly annuity? Assume a 5 percent discount rate. 5) John D. Investor owns an apartment building. Each apartment has certain items, such as refrigerators, garbage disposals, and carpets, that are expected to require replacement in 15 years. The total cost of replacement at the end of 15 years is expected to be $95,000. How much must John deposit monthly in an account earning 5 percent per year (compounded monthly) to have the required $95,000