An interest only mortgage is made for $80,000 at 10 percent interest for 10 years. The lender
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An “interest only” mortgage is made for $80,000 at 10 percent interest for 10 years. The lender and borrower agree that monthly payments will be constant and will require no loan amortization.
a. What will the monthly payments be?
b. What will be the loan balance after 5 years?
c. If the loan is repaid after 5 years, what will be the yield to the lender?
d. Instead of being repaid after 5 years, what will be the yield if the loan is repaid after 10 years?
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Related Book For 
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
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