Question: How do I answer part A and part B? For part A, answer with the Monthly Payment and the EOY remaining loan balance. Year 1:
How do I answer part A and part B?
For part A, answer with the Monthly Payment and the EOY remaining loan balance.
Year 1:
Year 2:
Year 3:
Year 4
Year 5:

A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $158,000, 30-year fully amortizing ARM with the following terms: Initial interest rate = 6 percent Index = 1-year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = None Payment cap = None Negative amortization = Not allowed Discount points = 2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY 2 = 9 percent; (BOY) 3 = 10.5 percent; (BOY) 4 = 11.5 percent; (BOY) 5 = 13 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period
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