A basic ARM is made for $250, 000 at an initial interest rate of 6% for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year 2 will increase to 8 percent. Assuming that a fully amortizing loan is made. What would be the monthly payments in year 2 if it is an interest-only ARM loan for the first two years?

	a.	$1,834.41
	b.	$1,498.88
	c.	$1,250.00
		d. $1,666.67

Which of the following about a 5/1 HYBIRD ARM loan is correct?

	a.	A 5-year fixed rate after which the interest rate would become adjustable, tied to an index, and would be reset each year thereafter
	b.	A 5-year fixed rate after which the interest rate would become adjustable, tied to an index for one year, and then the interest rate would be back to fixed rate thereafter
	c.	A 5-year adjustable rate after which the interest rate would become fixed rate thereafter
	d.	A 5-year adjustable rate after which the interest rate would become fixed rate for one year, and then the interest rate would be adjustable each year thereafter