Question: Ann gets a 3 0 year 1 / 1 Fully Amortizing ARM for $ 1 , 0 0 0 , 0 0 0 , with

Ann gets a 30 year 1/1 Fully Amortizing ARM for $1,000,000, with monthly payments and monthly compounding. Ann pays $10,000 in closing costs. The initial rate is 2%. In the future, the rate will reset to 250 basis points above the LIBOR. There are no rate caps or floors. Suppose at origination the LIBOR was 1%. What is the annualized true APR for the loan?

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