Problem
An interest only mortgage is made for $80,000 at 10% interest for 10 years. The lender and horrower agree that monthly payments will be constant and will require no loan amortization.
1) What will the monthly payments be?
2) What will be the loan balance after 5 years?
3) If the loan is repaid after 5 years. what will he the yield to the lender?
4) Instead of being repaid in 5 years, what will he the yield if the loan is repaid after 10 years?