Professional Documents
Culture Documents
5-2
Exhibit 5-1
Payments and Loan Balance Patterns, $60,000 PLAM, 4%
Inflation = 6% per Year, versus $60,000 CPM, 10% Interest,
30 Years
5-3
Negative Amortization
Payment does not cover the interest due
Caps
Floors
Assumability
Points
Prepayment
Conversion
5-8
5-10
5-11
Pricing Risk
Allocation of interest rate risk
Impact on default risk of specific borrowers
5-12
Exhibit 5-2
The Relationship between Interest Rate Risk, Default Risk,
and Risk Premiums
5-13
5-14
5-15
= 360
= $0
=5
PMT
= $536.82
5-16
CPT
PV
= 348
= $98,524.63
5-17
= 348
= $0
=7
PMT
= $662.21
5-18
5-19
5-20
= 360
= $0
=7
PMT
= $665.30
5-21
PV
= $98,984.19
5-23
5-24
= 360
= $0
=6
PMT
= $599.55
5-25
CPT
= 348
PV
= $98,771.99
5-26
5-27
= 12
= $629.53
= $101,204.32
would be the EOY2 Loan Balance
CPT
FV
5-29