Question: A fully amortizing CPM loan is made for $400,000 at 4.8% for 25 years. (1) Calculate the monthly payment for the loan (2) Assume the

A fully amortizing CPM loan is made for $400,000 at 4.8% for 25 years.

(1) Calculate the monthly payment for the loan

(2) Assume the borrow wants to prepay the loan at the end of 10 years. What is the remaining mortgage balance? How much interest did the lender collect over the 10 years?

(3) Instead of fully repaying the loan the borrower decides to reduce the loan balance by $20,000 at the end of year 10.

(a) What is the new loan maturity if the loan payments are not reduced?

(b) Assume the loan maturity will not be reduced. What will the new payments be?

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