Problem 1 A 30-year fixed-rate constant payment fully amortizing mortgage loan was made 10 years ago for $75,000 at 6% interest. The borrower would like to prepay the mortgage balance by $10,000 1. Assuming he can reduce his monthly mortgage payment, what is the new mortgage payment? 2. Assuming the loan maturity is shortened and using the original monthly payments, what is the new loan maturity? Problem 2 John wants to buy a property for $1,000,000 and wants a mortgage with an LTV ratio of 80%. Additionally, he also would like the loan to be structured as a partially amortizing mortgage with a balloon payment of $500,000 at maturity. The lender indicates that such a loan can be obtained for 30 years at 8% interest. 1. Construct the first three years' amortization schedule of the mortgage described above. 2. What will be the outstanding balance of this mortgage at the end of year 15? 3. What is the total amount of interest John paid over the entire term (30 years) of the mortgage? Problem 3 John wants to buy a property for $1,000,000 and wants a mortgage with an LTV ratio of 80%. Additionally, he also would like the loan to be structured as a constant amortization mortgage (CAM). The lender indicates that such a loan can be obtained for 30 years at 5% interest. 1. Construct the first three years' amortization schedule of the mortgage described above. 2. What will be the outstanding balance of this mortgage at the end of year 15