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You are considering purchasing a home with a Price-Level Adjusted Mortgage (PLAM.) The loan is for $250,000, and has only a 5 year term (with monthly payments.) The contract rate is 2.5%. Assuming that the actual inflation rate in years 1-2 is 3%, is 4% in years 3 and 4 and 6% in year 5. What will be your monthly payments in each year? What will be your effective interest rate over the life of the entire loan?

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Financial Management, Finance

Category:- Financial Management
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