Mortgage from local mortgage originator

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An investor is looking into purchasing the following mortgage from a local mortgage originator. This is a $210,000 CPM mortgage that was originated 5 years ago at 10% for 30 years with monthly payments.

a. How much should the investor pay for this mortgage if her required rate of return is 11% and the mortgage is not expected to prepay?

b. What’s the market value of the mortgage if the borrower is expected to prepay the loan in 5 years (assume same discount rate)?

Reference no: EM131978967

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