A borrower gets a fully amortizing constant amortization, Ask an Expert

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A borrower gets a fully amortizing constant amortization mortgage (CAM) for $200,000 at 12% annual interest rate for 15 years with monthly repayments.

1. Compute the loan repayments, principal amortizations, and interest payments for the first 6 months.

2. Redo the same calculations assuming the loan is a fully amortizing CPM, all else the same.

3. Which of the two amortization structures (CAM or CPM) would be riskier for the lender?

4. Which the two loan structures would provide a higher effective yield to the lender?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92800673

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