A borrower is purchasing a property for $325,000. She is considering the following three loans:

Loan 1: 75% LTV, 30 year FRM, fully amortizing, 4% interest

Loan 2: 80% LTV, 30 year 5/1 Hybrid ARM, fully amortizing, 3.25% interest in fixed period

Loan 3: 90% LTV, 15 year FRM, fully amortizing, 3.5% interest

Answer the following questions:

a. Order these loans from lowest to highest initial payment. (4pt)

b. Assume that in year 6, the reference index rate for the hybrid loan is 3% and the margin is 1.5%. Does the order of the payment that you found in part a change? Why or why not? (3pt)

c. If the borrower held each loan until maturity, how much in interest would she pay on each loan? (5pt)

d. Which loan would you recommend to this borrower and why? (3pt)