1. Consider a two-step mortgage for $150,000, 30 years, monthly payments, an initial interest rate of 5%, a cap of 5%, and a single rate adjustment at the end of year 7. What is the payment amount during the first 7 years of this loan?
2. Calculate the annual cost of debt for the following semi-annual bond. The years left to maturity is 12 years, the coupon rate is 6% and the coupons are paid semi-annually. The face (par) value is $1,000 and the bond currently sells for $976.