1. A bank makes a 30 year Fully Amortizing FRM for $800,000 at an annual interest rate of 4.5% compounded monthly, with monthly payments. What is the difference between the balance and the market value of the loan after 36 monthly payments if the interest rate rises to 5%?
(Give the absolute value of the difference, so the answer should be a positive number.)
2. A bank makes a 30 year Fully Amortizing FRM for $1,500,000 at an annual interest rate of 6% compounded monthly, with monthly payments. Suppose inflation is 2% per year, compounded monthly. What is the real value of the 120th payment?
3. A bank originates a 30 year fully amortizing FRM at an annual interest rate of 4.5%. 9 years later the bank’s cost of funds is 6.20%. What is the bank’s NIM on this loan?
(Your answer can be positive or negative, use the correct sign)