1. Consider a 30 year, FA graduated payment mortgage for $500,000 at 6%, with 5 payment increases of 20%. If fees are 2 points plus $8,000, what is the regulation-Z required APR? (please show steps)

2. You write one IBM July 120 call contract for a premium of $10. You hold the option until the expiration date when IBM stock is at $115 per share. How much profit or loss you will realize on the investment?

3. Assume that U.S. and British investors require a real return of 1.5 %. If the nominal U.S. interest rate is 11.7 %, and the nominal British interest rate is 8.1 %, what is the expected rate of inflation in the U.S.?

Enter answer in percents.