General Instructions for parts 1-4:

Your complete assignment should read and look like a professional report

For each part, you are required to create an "input box" and an "output box" area. The user (me in this case) should be able to change ANY of the values included in the input box and receive the corresponding values included in the output box. The amortization table schedule should also change with different values entered into the input box. You are advised to use the Excel template I provided you for this project.

The input and output boxes should include the following variables: original property value, initial mortgage amount, interest rate, additional monthly payment to the principal (a constant amount that the borrower elects to pay over and above the required payment every month), holding period (in months - until the property is sold), expected property price annual appreciation rate, mortgage payment, initial loan-to-value, mortgage balance at the end of the holding period and equity at the end of holding period.

Part 1: Fully amortized fixed rate mortgage (CPM)

1. monthly amortization schedule for a fully amortized $350K, 15yr, 3.75% fixed rate mortgage. The original loan balance is 80% of the property's value when initiated, and the property is expected to appreciate at a rate of 2.0% annually.
2. What is the remaining loan balance at the end of the holding period if the property owner sells the property after 62 months?
3. Illustrate with a well-labeled graph the amount of equity the property owner builds throughout the holding period of the loan.
4. What is the owner equity in the property when the property is sold?
5. What is the NPV and IRR of this investment, if the property owner sells the property after 62 months?
6. What is the APR and EAR of this mortgage, if the property owner pays 2 points?
7. What is the NPV and IRR of this investment, if the property owner pays 2 points & the property owner sells the property after 62 months?

Part 2: Partially amortized fixed rate mortgage (CPM)

1. monthly amortization schedule for a partially amortized $300K, 30yr, 4.25% fixed rate mortgage. The mortgage is 40% amortized over the life of the loan. The original loan balance is 75% of the property's value when initiated, and the property is expected to appreciate at a rate of 2.0% annually.
2. What is the remaining loan balance at the end of the holding period if the property owner sells the property after 73 months?
3. Illustrate with a well-labeled graph the amount of equity the property owner builds throughout the holding period of the loan.
4. What is the owner equity in the property when the property is sold?
5. What is the NPV and IRR of this investment, if the property owner sells the property after 73 months?

Part 3: Negative amortization fixed rate mortgage (CPM)

1. monthly amortization schedule for a negatively amortized $250K, 5yr, 4.75% fixed rate mortgage. The monthly payments on the mortgage are $700. The original loan balance is 97% of the property's value when initiated and the property is expected to depreciate at a rate of 1.50% annually.
2. What is the remaining loan balance at the end of the holding period if the property owner sells the property after 59 months?
3. Illustrate with a well-labeled graph the amount of equity the property owner builds throughout the holding period of the loan.
4. What is the owner equity in the property when the property is sold?
5. What is the NPV and IRR of this investment, if the property owner sells the property after 59 months?

Part 4: Fully amortized Variable rate mortgage

1. Assume that you know in advance (at the time of the mortgage initiation) the future prime rate at any point in time. According to you, the prime rate will be the following:
2. At mortgage initiation: 3.50%
3. 6 months after mortgage initiation: 3.75%
4. 10 months after mortgage initiation: 4.00%

• 21 months after mortgage initiation: 4.25%
• 32 months after mortgage initiation: 4.50%
• 52 months after mortgage initiation: 5.00%
• 56 months after mortgage initiation: 5.50%

From here on, the prime rate remains the same for the reminder time of the loan.

1. monthly amortization schedule for a fully amortized $320K, 15yr, 2/1 hybrid ARM mortgage that charges a prime rate minus 1.0%. The original loan balance is 70% of the property's value when initiated, and the property is expected to appreciate at a rate of 2.5% annually.
2. What is the remaining loan balance at the end of the holding period if the property owner sells the property after 59 months?
3. Illustrate with a well-labeled graph the amount of equity the property owner builds throughout the holding period of the loan.
4. What is the owner equity in the property at the time the property is sold?
5. What is the NPV and IRR of this investment, if the property owner sells the property after 59 months?