Suppose you are considering a PLAM with the following characteristics: Mortgage Amount = $175,000 30-Year Term Monthly
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Question:
Suppose you are considering a PLAM with the following characteristics: Mortgage Amount = $175,000 30-Year Term Monthly Payments Current Real Rate = 5.50 percent Expected Inflation Rates: EOY1 = 3%, EOY2 = - 2%, EOY3 thru EOY30 = 0% Annual Payment Adjustments
A. What is the APR of this loan? Answer:__________
B. What is the effective cost if the loan is repaid at the end of year 2? Answer:__________
C. Suppose that, instead of repaying the loan, you continue to make the payments and your monthly payment in year 4 is 1,043.09. What was the inflation rate for year 3? Answer:__________
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