Response to the following problem:
The Monte Company borrows $50 million via a term loan. The loan matures in two years and the payments are made monthly. The loan is a fully amortizing loan with a floating interest rate. The floating interest rate is reset at the end of the first year.
a. For the first year, the interest rate is 12%. Determine the amount of the monthly payment for the first 12 months and construct an amortization schedule for the first 12 months.
b. Suppose at the beginning of the second year, the interest rate reset formula requires an interest rate of 10%. Determine the amount of the monthly payment for the last 12 months and construct an amortization schedule for the last 12 months.