Question: Emily takes out a 3 0 - year adjustable rate mortgage loan for $ 2 5 0 , 0 0 0 with monthly payments. The

Emily takes out a 30-year adjustable rate mortgage loan for $250,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4 percent, after that the rate can reset with a 5 percent annual payment cap. On the reset date, the composite rate is 6 percent. Assume that the loan allows for negative amortization. What would be the outstanding balance on the loan at the end of Year 3 for Emily??

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