Secondary Mortgage Purchasing Company (SMPC) wants to buy your mortgage from the local savings and loan. The original balance of your mortgage was $140,000 and was obtained 5 years ago with monthly payments at 10 percent interest. The loan was to be fully amortized over 30 years.

a. What should SMPC pay if they want an 11 percent return?

b. How would your answer to part

(a) change if Secondary Mortgage expected the loan to be re- paid after five years?

AppendixLO1