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Consider a $5,000,000, 8.5%, 30-year mortgage with monthly payments and a 7-year maturity with balloon....

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Accounting

Consider a $5,000,000, 8.5%, 30-year mortgage with monthly payments and a 7-year maturity with balloon.

(a) How much is this loan worth at issuance if the market YTM for such loans is 8% BEY?

(b) If instead the market yield is 9%, how many disbursement discount points must the lender charge to avoid doing a negative NPV deal?

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