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A property is purchased for $70,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.5 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $63,000 for a term of 30 years. The homeowner expects to sell the property after seven years.

a. If the initial monthly payment is $498.57, what will payments be at the beginning of years 2, 3, 4, and 5?

b. What would the payment be if a CPM loan was available?

c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92081913

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