A reverse annuity mortgage is made with a balance not to exceed $300,000 on a property now valued at $700,000. The loan calls for monthly payments to be made to the borrower for 120 months at an interest rate of 11 percent.

a. What will the monthly payments be?

b. What will be the RAM balance at the end of year 3?

c. Assume that the borrower must have monthly draws of$2,000 for the first 50 months of th~
loan. Remaining draws from months 51 to 120 must be determined so that the ~300,OOO maximum is not exceeded in month 120. What will draws by the borrower be dunng months 51 to 120?

AppendixLO1