Question 3: Mortgage Products (20 points) A young first-time homebuyer is considering the purchase of a...

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Question 3: Mortgage Products (20 points) A young first-time homebuyer is considering the purchase of a HK$10 million property by taking out an 80% mortgage financing with the following terms: Tenor: 25 years, monthly payments Mortgage interest rate: "Prime" minus 2.5% p.a., Prime Rate is 5%. Standard deposit savings rate: 0.1% p.a. Suppose the following fixed-rate mortgage products are available for consideration. (1) Conventional fully amortized mortgage. (CPM) (2) Growing equity with a 4% increase in the monthly mortgage payments each year. (GEM) (3) Biweekly mortgage (BWM) (4) Graduated payment mortgage with three 5-year steps (3 jumps) and 8% step-up rate before the monthly payments level off. (GPM) (5) Deposit-linked mortgage with savings deposit of HK$500,000 required, deposit interest rate equal to prime minus 2.5% p.a. subject to the 50% cap provision. (DLM) (a) Fill in the following table. (15 points) Mortgage Monthly Mortgage Payments (1st month) Payback Period (Years) Total Interest Expense CPM GEM BWM GPM DLM Question 3: Mortgage Products (20 points) A young first-time homebuyer is considering the purchase of a HK$10 million property by taking out an 80% mortgage financing with the following terms: Tenor: 25 years, monthly payments Mortgage interest rate: "Prime" minus 2.5% p.a., Prime Rate is 5%. Standard deposit savings rate: 0.1% p.a. Suppose the following fixed-rate mortgage products are available for consideration. (1) Conventional fully amortized mortgage. (CPM) (2) Growing equity with a 4% increase in the monthly mortgage payments each year. (GEM) (3) Biweekly mortgage (BWM) (4) Graduated payment mortgage with three 5-year steps (3 jumps) and 8% step-up rate before the monthly payments level off. (GPM) (5) Deposit-linked mortgage with savings deposit of HK$500,000 required, deposit interest rate equal to prime minus 2.5% p.a. subject to the 50% cap provision. (DLM) (a) Fill in the following table. (15 points) Mortgage Monthly Mortgage Payments (1st month) Payback Period (Years) Total Interest Expense CPM GEM BWM GPM DLM