question number 1

1. a. True I False (explain; "The difference between a FRM {Fixed-Rate Mortgage) and a GPM [Graduate-Payment Mortgage) is that GPM's interest rate increases through time." b. 'When youl purchased your house 4 years ago, you took out a $300,000, 30 year FRM loan at "1.5%. You also paid 2 points to get this loan. Now you want to sell your house and buy another one. In order to do so, you must pay off the existing one. The loan came with 1% prepayment penalty. What has been your effective interest rate on this loan? c. Matt and Jane are in the market for mortgage. Matt expects to prepay his loan in 4 years while Jane expects to hold her loan for 15 years. Ceteris parihus (everything else being the same), which of the two, Matt or Jane, is more likely to choose an ARM over an FEM? Briey explain why. d. You wish to borrow $200,000 for 20 years at ?% interest rate and amortize the loan by making monthly payments. You also agree to make a balloon payment of $30,000 at the end of your last month (240th month). What will be your monthly pagent