A price level adjusted mortgage (PLANt) is made with the following terms:
Amount = $95,000 Initial interest rate = 4 percent Term = 30 years Points = 6 percent Payments to be adjusted at the beginning of each year.
Assuming inflation is expected to increase at the rale of 6 percent per year for the next five years:

a. Compute the payments at the beginning of each year (BOY).

b. What is the loan balance at the end of the fifth year?

c. What is the yield to the lender on such a mortgage? .AppendixLO1