Question $1(10$ points$)$

A basic ARM is made for $$200,000$ at an initial interest rate of $6\%$ per year for $30$

years with an annual reset date. The borrower believes that the interest rate at the

beginning of year BOY $2$ will increase to $7\%.$ Assuming that a fully amortizing loan is

made, what will monthly payments be during year $1($rounded to the nearest dollar$)?$

A

Question $4(10$ points$)$

In question $1,$ what will be the loan balance at the EOY $2($rounded to the nearest

dollar$)?$

$A$

Question $5(10$ points$)$

In question $1,$ what would be monthly payments in year $1$ if they are to pay interest

only $($rounded to the nearest dollar$)?$