Question: 28 29 Consider a 3/1 ARM with initial cap equal to 5%, periodic cap equal to 1%, and lifetime cap equal to 6%. Suppose the

28 29 Consider a 3/1 ARM with initial cap equal to 5%,

periodic cap equal to 1%, and lifetime cap equal to 6%. Suppose

Consider a 3/1 ARM with initial cap equal to 5%, periodic cap equal to 1%, and lifetime cap equal to 6%. Suppose the teaser rate for this loan is 2.25% and the loan is indexed to LIBOR rate with a margin of 2.5%. Which statement is FALSE about future interest rates for this loan? The interest rate in the second year will be 2.25% At the first reset, the rate can not go above 7.25% If at the first rest the LIBOR rate is 3%, then the fully indexed rate will be 5.5% The maximum interest rate on this loan is 6% Which of the following is NOT a mortgage type? Subprime loan Jumbo loan FHA mortgage Conventional Conforming Loan VA mortgage PMI mortgage

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