An adjustable rate mortgage (ARM) loan is made for $150,000 for 30 years with the following terms:
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Question:
An adjustable rate mortgage (ARM) loan is made for $150,000 for 30 years with the following terms: Compounding frequency = monthly Initial interest rate = 5% per year Index = 1-year government bond rate Payments reset each year Margin = 2% Interest rate cap = none Payment cap = 20% increase in any year Discount points = 2% Fully amortising loan, and negative amortisation is allowed if payment cap is reached
Yield of the ARM for the first 2-year period of the loan?
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