What is the prepayment penalty

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Question: In 2010 a mortgage loan of $8,500,000 was issued by Associated Bank on a downtown office building. The terms of the loan were 10 years, 6.15% interest rate, interest only (no amortization). The borrower has a buyer for the property and would like to sell it on 2016, however, the loan has a yield maintenance prepayment clause in the mortgage documents where the prepayment penalty is based on reinvesting the prepaid mortgage amount in U.S. Treasury securities of a similar term as the remaining term of the loan. What is the prepayment penalty? Use the average between the 3 year and 5 year US Treasury Yields to get the 4 year US Treasury.

Reference no: EM131924064

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