An interest-only mortgage is made for $94,000 at 6 percent interest for 10 years. The lender and borrower agree that monthly payments will be constant and will require no loan amortization.   Required: a. What will the monthly payments be? b. What will be the loan balance after five years? c. If the loan is repaid after five years, what will be the yield to the lender? d. Instead of being repaid after five years, what will be the yield if the loan is repaid after 10 years?

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Q: please step by step solution.

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.