Yield maintain fee will be changed

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Reference no: EM131343433

A borrower has a $10,000,000 interest-only loan at 8% interest rate for 20 year. There is a lockout period of 10 years.

a. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintain fee (YMF) will be changed, so the lender will make 8% for the entire 20 year. Assuming the loan is prepaid at the end of year 12 and the mortgage interest rate at that time is 6%. How much is the YMF fee.

b. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a prepayment fee of 2% of balance will be changed, Assuming the loan is prepaid at the end of year 12 and the mortgage interest rate at that time is 6%. How much is the prepayment fee.

Reference no: EM131343433

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