Sharon borrows an adjustable rate loan (ARM) of $100,000 with 3 year loan maturity. The initial interest rate for the loan is 8.5%, the margin is 3%, the loan amortization period is 15 years, the frequency of adjustment is 1 year (monthly compounding), There will be a discount point of 3% for the loan. Also, the index rates for the next 2 years are 11% and 8%, respectively. NOW suppose there is an annual interest rate cap of 2% specified in the loan contract, what will be the effective mortgage yield for borrowing this loan? Assume that no negative amortization is allowedn

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Explanation From the given data The initial interest ra... View the full answer