Consider an adjustable rate mortgage (ARM) of $190,000 with a maturity of 30 years and monthly...
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Consider an adjustable rate mortgage (ARM) of $190,000 with a maturity of 30 years and monthly payments. At the end of each year, the interest rate is adjusted to become 2.5 percentage points above the index. There is an annual cap of 250 basis points, and a lifetime cap of 500 basis points (i.e., with 2.5/5 interest rate caps). The lender offers a teaser of 1.00% for the first year. The following are the current and index rates: Time At origination (for yr 1) At end of yr 1 (for yr 2) At end of yr 2 (for yr 3) At end of yr 3 (for yr 4) T-Bill Yield (given) 3.50%, 4.00 %, 8.00%, 5.00% 4.50%, 6.00 %, 10.00%, 7.00% 6.00 %, 8.50 %, 11.00%, 7.00% 6.50%, 9.00%, 10.00%, 7.00% 6.00%, 9.00%, 10.00%, 7.00% 5.50%, 6.00 %, 9.00%, 7.00% 4.50% 7.00% 9.00% 5.00% At end of yr 4 (for yr 3) # 1). What is the contract rate for years 1, 2, 3, and 4? 8.00% Consider an adjustable rate mortgage (ARM) of $190,000 with a maturity of 30 years and monthly payments. At the end of each year, the interest rate is adjusted to become 2.5 percentage points above the index. There is an annual cap of 250 basis points, and a lifetime cap of 500 basis points (i.e., with 2.5/5 interest rate caps). The lender offers a teaser of 1.00% for the first year. The following are the current and index rates: Time At origination (for yr 1) At end of yr 1 (for yr 2) At end of yr 2 (for yr 3) At end of yr 3 (for yr 4) T-Bill Yield (given) 3.50%, 4.00 %, 8.00%, 5.00% 4.50%, 6.00 %, 10.00%, 7.00% 6.00 %, 8.50 %, 11.00%, 7.00% 6.50%, 9.00%, 10.00%, 7.00% 6.00%, 9.00%, 10.00%, 7.00% 5.50%, 6.00 %, 9.00%, 7.00% 4.50% 7.00% 9.00% 5.00% At end of yr 4 (for yr 3) # 1). What is the contract rate for years 1, 2, 3, and 4? 8.00%
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The contract rate for years 1 2 3 and 4 are 600 900 100... View the full answer
Related Book For
Organizations Behavior, Structure, Processes
ISBN: 978-0078112669
14th Edition
Authors: Gibson, Ivancevich, Donnelly, Konopaske
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