A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $97,000 Initial Interest rate = 4 percent Term 30 years Points = 6 percent Payments to be reset at the beginning of each year. Assuming Inflation is expected to Increase at the rate of 6 percent per year for the next five years: Required: 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the payments at the beginning of each year (BOY). Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Payments Year 1 Year 2 Year 3 Year 4
A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $97,000 Initial Interest rate = 4 percent Term 30 years Points = 6 percent Payments to be reset at the beginning of each year. Assuming Inflation is expected to Increase at the rate of 6 percent per year for the next five years: Required: 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the payments at the beginning of each year (BOY). Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Payments Year 1 Year 2 Year 3 Year 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:A price level adjusted mortgage (PLAM) is made with the following terms:
Amount = $97,000
Initial Interest rate = 4 percent
Term 30 years
Points = 6 percent
Payments to be reset at the beginning of each year.
Assuming Inflation is expected to Increase at the rate of 6 percent per year for the next five years:
Required:
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?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Compute the payments at the beginning of each year (BOY).
Note: Do not round intermediate calculations. Round your final answers to 2 decimal places.
Payments
Year 1
Year 2
Year 3
Year 4
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