Question: A borrower gets a fully amortizing constant amortization mortgage (CAM) for $200,000 at 12% annual interest rate for 15 years with monthly repayments. 1. Compute

A borrower gets a fully amortizing constant amortization mortgage (CAM) for $200,000 at 12% annual interest rate for 15 years with monthly repayments.

1. Compute the loan repayments, principal amortizations, and interest payments for the first 6 months.

2. Redo the same calculations assuming the loan is a fully amortizing CPM, all else the same.

3. Which of the two amortization structures (CAM or CPM) would be riskier for the lender?

4. Which the two loan structures would provide a higher effective yield to the lender?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year, fully amortizing, FRM, with constant...

PLEASE ENTER ANSWERS IN BLUE BOLD INK! Use the following information for all the questions. Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a...

Please show work via excel shown below!! Ann would like to buy a house. It costs $600,000. Her down payment will be $100,000. She will take out a mortgage for the remainder. It will be a 30 year,...

PLEASE show what is put into the cell. Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year,...

Use the following information for the remaining questions. Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It...

Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year, fully amortizing, FRM, with constant...

Can you help me with the IRR and the excel? TI 2 200.000 59000 Peo.c00.00 11 000 Green represent inputs Purple represent outputs Marger MEE JOS al ser 11 547700 90 WS 5 + dan Balance Mermerest...

Use the following information for the remaining questions. (18 Points) Ann would like to buy a house. It costs $600,000. Her down payment will be $100,000. She will take out a mortgage for the...

Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year, fully amortizing, FRM, with constant...

Hello! Can you please answer all the questions with work and fill out the graphs!!! Ann would like to buy a house. It costs $600,000. Her down payment will be $100,000. She will take out a mortgage...

Nora, pregnant for the first time, believes that a few cigarettes and a glass of wine a day won't be harmful. Provide Nora with research-based reasons for not smoking or drinking.

Make an investigation "Thought Errors", describing 8 errors, and giving some examples. Example - Drawing conclusions to quickly : Rumors are saying bad things about a person and someone just blindly...

EXERCISE 11-4. Calculating Material Variances At Midwest Refrigeration, the standard price for the Z240 electrical relay (a component used in the production of a commercial refrigeration unit) is...

2. Regulating travel agencies. The provincial government proposes to establish a fund to compensate travellers who do not get what they pay for after arranging a vacation through a travel agency. For...

6. Suppose GDP is $16 trillion, with $10 trillion coming from consumption, $2 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $500 billion coming from...

6. Suppose that in 1984 the total output in a single-good economy was 7,000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume that in 2005 the...

7. Suppose GDP is $15 trillion, with $8 trillion coming from consumption, $2.5 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $1 trillion coming from...