6, A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $150,000, 30-year fully

amortizing ARM with the following terms:

Initial interest rate = 6 percent

Index = 1-year Treasuries

Payments reset each year

Margin = 2 percent

Interest rate cap= None

Payment cap= None

Negative amortization= Not allowed

Discount points = 2 percent

Based on estimated forward rates, the index to which the ARM is tied is forecasten as follows:

Beginning of year (BOY ) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY ) 4 = 9.5 percent; (BOY ) 5

Compute the payments, loan balances, and yield for the unrestricted ARM for the five-year period.