NEEDS TO BE DONE IN EXCEL. A price level adjusted mortage (PLAM) is made with the following...

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NEEDS TO BE DONE IN EXCEL.
A price level adjusted mortage (PLAM) is made with thefollowing terms:
Amount=$95,000
Initial interest rate= 4 percent
Term= 30 Years
Points= 6 percent
Payments to be reset at the beginning of eachyear.
Assuming inflation is expected to increase at the rate of 6 percentper year for the next five years:
a. Compute the payments at the beginning of each year (BOY)
b. what is the loan balance at the end of the fifth year?
c. what is the yield to the lender on such a mortgage?

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4.1 Ratings (546 Votes)

Step 1 Price level adjusted mortgage PLAM is a kind of mortgage wherethe mortgage payments get adjusted for inflation The new mortgagepayments after the adjustments are computed using the adjustedbalance In this kind of mortgages interest rate does not getvaried while the principal changes Usually the changes arereflected by indexCPI For implementation of these changes theintervals are agreed upon by lender and borrower at See Answer

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