1. A fixed rate mortgage is made for $60,000 for a term of 10 years. The borrower and lender agree that a balance of $20,000 will remain and be repaid as a lump sum at that time.
a)If the interest rate is 9%, what must monthly payments be over the 10-year period?
b)If the borrower chooses to repay the loan after 5 years instead of at the end of year 10, what must the loan balance be?
2.You have a $100,000 mortgage for 15 years with 5% interest rate. How much interest and amortisation will you pay in years 6 and 7 (assume monthly compounding)?
3.You have a mortgage of $200,000 with an interest of 9.5% (monthly) for 30 years with 2 points. If you decide to repay the loan at year 5 what is the effective borrowing cost? (hint: you are asked for the actual interest rate charged)
4.A property is valued at $1,000,000 and you can receive an $800,000 with a 9% interest for 30 years (use monthly compounding). If you want an 8% cash-on-cash return how much should the NOI be (20 points) (formats you will need to use: Value=Mortgage+Equity, Debt Service=PMTx12, Cash-on-cash return=Before Tax Cash Flow/Equity, Net Operating Income=Debt Service+ Before Tax Cash Flow)