QUESTION 18 A 30 year 1/1 ARM has an initial rate of 3.75%. In the future, the rate will reset to 425 basis points above the LIBOR index with no rate caps or floors. In 1 year, at the time of the first reset, the LIBOR is 1%. What will be the fully indexed rate at the first reset? 0 4.75% O 1.00% 8.00% 5.25% QUESTION 19 Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 5% compounded monthly, with monthly payments. After 5 years of payments, Ann can refinance the balance into a 25 year Fully Amortizing FRM at an annual interest rate of 4% compounded monthly, with monthly payments. Refinancing will cost Ann 1 point and $1,500 in closing costs. If Ann refinances into this loan and makes payments for 25 years, what will be her annualized IRR from refinancing? 54.38% 58.54% 62.549 4.88% QUESTION 20 Lucy bought a house for $150,000. Luc annual cost of ownership net of tax savings is actly equal to the annual rent she would have paid to live in the same house. The price grows 3.5% annually (compounded annually) Suppose buying costs are 5% (of the purchase price of the house) and selling costs are 8% (of the selling price of the house). Lucy owns the house for 30 years. Lucy buys the home with an 80% LTV IO mortgage The interest rate is irrelevant because the cost of ownership net tax shield is equal to rent. What is Lucy's annualized IRR