Question: 13) You have a choice between a 30-year fixed rate loan at 7.5% and an ARM with a first-year rate of 5%. The ARM rate

13)

You have a choice between a 30-year fixed rate loan at 7.5% and an ARM with a first-year rate of 5%. The ARM rate rises to 8.5% at the start of the third year. Neglecting compounding and changes in principal, estimate your monthly savings with the ARM during the first year on a $120,000 loan

a) $230

b) $250

c) $270

d) $300

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