Jessica took a 3/1 ARM for 30 years with monthly payments. Her teaser rate was 4.5%,...

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Jessica took a 3/1 ARM for 30 years with monthly payments. Her teaser rate was 4.5%, and the interest rate is indexed to 1 year CMT rate with a 2.5% margin. At the beginning of year 4 of her mortgage, the 1 year CMT is 2%. At the time of the first reset Jessica's payment will Stay the same Increase Impossible to determine Decrease Consider a 3/1 ARM with initial cap equal to 5%, periodic cap equal to 1%, and lifetime cap equal to 6%. Suppose the teaser rate for this loan is 2.25% and the loan is indexed to LIBOR rate with a margin of 2.5%. Which statement is FALSE about future interest rates for this loan? The maximum interest rate on this loan is 6% At the first reset, the rate can not go above 7.25% If at the first rest the LIBOR rate is 3%, then the fully indexed rate will be 5.5% The interest rate in the second year will be 2.25% Jessica took a 3/1 ARM for 30 years with monthly payments. Her teaser rate was 4.5%, and the interest rate is indexed to 1 year CMT rate with a 2.5% margin. At the beginning of year 4 of her mortgage, the 1 year CMT is 2%. At the time of the first reset Jessica's payment will Stay the same Increase Impossible to determine Decrease Consider a 3/1 ARM with initial cap equal to 5%, periodic cap equal to 1%, and lifetime cap equal to 6%. Suppose the teaser rate for this loan is 2.25% and the loan is indexed to LIBOR rate with a margin of 2.5%. Which statement is FALSE about future interest rates for this loan? The maximum interest rate on this loan is 6% At the first reset, the rate can not go above 7.25% If at the first rest the LIBOR rate is 3%, then the fully indexed rate will be 5.5% The interest rate in the second year will be 2.25%

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