Question: Consider a $2 million, 7.5%, 30-year mortgage with monthly payments and an eight-year maturity with balloon.
a. How much is this loan worth at issuance if the market YTM for such loans is 7.125% BEY?
b. If instead the market yield is 7.875%, how many disbursement discount points must the lender charge to avoid doing a negative NPV deal?