Question: 3) Assume a 2/1 ARM without cap. Term=30 years. Initial loan balance=$200,000. The teaser rate=7%, margin=2%. What is the mortgage rate for Year 2? Year

3) Assume a 2/1 ARM without cap. Term=30 years. Initial loan balance=$200,000. The teaser rate=7%, margin=2%. What is the mortgage rate for Year 2?

Year

LIBOR

Mortgage rate

Beginning balance

mortgage payment

Interest payment

Principal payment

Ending balance

1

8.60%

2

9.50%

3

10%

Select one:

a. 7%

b. 12%

c. 11.5%

d. 9.5%

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