An ARM is made for $$175,000$ for $30$ years with the following terms:

Initial interest rate $=7$ percent

Index $=1-$year Treasuries

Payments reset each year

Margin $=2$ percent

Interest rate cap $=$ None

Payment cap $=5$ percent increase in any year

Discount points $=2$ percent

Fully amortizing; however, negative amortization allowed if payment cap reached

Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year $(BO)2=7$ percent; $($BOY$)3=8\mathrm{.}5$ percent; BOY$)4=9\mathrm{.}5$ percent; $(BOY)5=11$ percent.

Required:

a$.$ Compute the payments and loan balances for the ARM for the five$-$year period.

b$.$ Compute the yield for the ARM for the five$-$year period.

Complete this question by entering your answers in the tabs below.

Required B

Compute the payments and loan balances for the ARM for the five$-$year period. $($Do not round intermediate calculations.

Round "Payments" to $2$ decimal places and "Loan Balance" to the nearest dollar amount.$)$

Payments