Ann is looking for a fully amortizing 30 year Fixed RateMortgage with monthly payments for $3,200,000. Mortgage A has a4.38% interest rate and requires Ann to pay 1.5 points upfront.Mortgage B has a 6% interest rate and requires Ann to pay zero feesupfront.
(A) Assuming Ann makes payments for 30 years, what is Ann’sannualized IRR from mortgage A?
(B) Assuming Ann makes payments for 30 years, what is Ann’sannualized IRR from mortgage B?
(C) Assuming Ann makes payments for 2 years before she sells thehouse and pays the bank the balance, what is Ann’s annualized IRRfrom mortgage A?
(D) Assuming Ann makes payments for 2 years before she sells thehouse and pays the bank the balance, what is Ann’s annualized IRRfrom mortgage B?
