Your company has arranged a variable-rate loan from a new bank. The loan amount is $1,200,000, due in 5 years, and payments are based on a 25-year amortization. The interest rate will be 200 basis points over the Wall Street Journal Prime Rate. The prime rate is 5% in year 1 and 6% in year 2.

You are left to figure out:

What will the payment be in year 1 and 2? And what will the loan balance be at the end of year 1?

Please show all work. Thank you!