1. You are securing a new mortgage note totaling $180,000. It is a balloon note that matures (must be paid off) in 7 years. The monthly payments will be calculated based on the note amortizing over a 30-year period at an annual rate of 4.25%. From this information, please calculate out the monthly payment for the note and tell me how much you will owe the bank when the note balloons in 7 years. (Show steps using a financial calculator)

2. You are purchasing a condominium for $120,000 and will put a down payment on the condo sufficient to make it a 75% LTV. You do not envision living in the condo for more than 5 years so you are thinking of pursuing a 5/1 ARM that has a 2/6 min/max feature, a teaser rate of 3.25%, a floor equal to the teaser rate, a 30-year amortization period, a margin of 3.25 and an index based on the 1-year LIBOR. First of all, calculate your initial monthly payment for this loan based on the teaser rate. Secondly, if you are still in the loan after five years, what will your new rate AND payment adjust to if the 1-year LIBOR at that time is 3.1%?