Chapter 4 Problems 1. A borrower obtains a fully amortizing loan for $1,175,000 at 5.75% interest for 20 years. What will be the monthly payment on the loan? If this loan had a maturity of 25 years, what would be the monthly payment? 2. A fully amortizing mortgage loan is made for $165,000 at 4.75%interest for 20 years. Payments are to be made monthly. Calculate: a. Monthly payments. b. Interest and principal payments during month 1. c. Total principal and total interest paid over 20 years. d. The outstanding loan balance if the loan is repaid at the end of year 10. e. Total monthly interest and principal payments through year 10. f. What would the breakdown of interest and principal be during month 50? 3. A fully amortizing mortgage loan is made for $200,000 at 3.5% interest for 25 years. Determine payments for each of the periods a-d below if interest is accrued (how often the payments are per year). a. Monthly. b. Quarterly. c. Annually. d. Weekly. 4. Regarding Problem 3, how much total interest and principal would be paid over the entire 25-year life of the mortgage in each case? Which payment pattern would have the greatest total amount of interest over the 25-year term of the loan? Why? 5. An interest-only mortgage is made for $95,000 at 4.8% interest for 10 years. The lender and borrower agree that monthly payments will be constant and will require no loan amortization. a. What will the monthly payments be? b. What will be the loan balance after five years?

c. If the loan is repaid after five years, what will be the yield to the lender? d. Instead of being repaid after five years, what will be the yield if the loan is repaid after 10 years?