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Ben Dover (Eileens brother) is purchasing a duplex in Colorado Springs for $650,000 and is financing the purchase with a mortgage loan. Here are the particulars:

80% LTV

Loan 1: 3.625% interest rate w no points

Loan 2: 3.250% interest rate w 1.5 points

15-year term

Monthly payments

Required:

1. Prepare amortization schedules for each of the two loan alternatives. Set these up to show year-end balances, not month-end balances.
2. Calculate the effective interest rates for each, assuming no early repayment.
3. Calculate the effective interest rates for each, assuming the loans are paid off at the end of year four (4).
4. Calculate the breakeven point for recovery of points for the second loan.
5. Calculate the IRR for the second loan, assuming (a) the loan is carried to full term and (b) the loan is repaid at the end of year 4.