1) A mortgage loan of $1,875,000 has just been made on a property valued at $2,500,000. The interest rate is 6% with 2 points. The loan will require level monthly payments to amortize the principal over 25 years. The mortgage also carries a 1% prepayment penalty.
a. How much interest is paid in the fifth year?
b. If the mortgage is paid off after 7 years what will the effective yield be?