What the market value is compared to the balance

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Reference no: EM132185209

Question - Yield maintenance with a balloon payment Loan amount 1,000,000, 6% coupon rate, Term=10 years, amortization period = 30 years. Payoff at the end of the year 8 with reinvestment rate of 3.5%. Conceptually, the borrower wants to prepay with two years remaining on the contract where they would have 24 months of regular payments and a future value of the contractual balloon amount. We are looking to see what the market value is compared to the balance at time of prepayment and the difference is the fee.

Reference no: EM132185209

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