price level adjusted mortgage (PLAM)
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A price level adjusted mortgage (PLAM) is made with the following terms: Amount $200,000, Initial interest rate 4 percent, Term 30 years, Payments to be reset at the beginning of each year. Assuming inflation is expected to increase at the rate of 6 percent at the end of year five. (4/. )
a. Compute the payments at the beginning of year 3(BOY3).
b. What is the loan balance at the end of the fifth year?
c. What is the yield to the lender on such a mortgage?
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