Question: Amount = $96,000 Initial interest rate = 4 percent Term = 30 years Points = 6 percent Payments to be reset at the beginning of

Amount = $96,000

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:

Compute the payments at the beginning of each year (BOY).

What is the yield to the lender on such a mortgage?

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