You are considering a loan on the following terms: 5/1 ARM: start rate = 5.5%, Index...

 

Transcribed Image Text:

You are considering a loan on the following terms: 5/1 ARM: start rate = 5.5%, Index = (SOFR) 4% at loan origination, Margin = 3%, Caps = 3/1/5. 1. What is the interest rate for years 1-5? 2. What is the interest rate in year 6 assuming the index is now 4.75%? 3. What is the interest rate in year 7 assuming the index is now 5% (for the adjustment calculation?) 4. What is the "lifetime" maximum interest rate for this loan (over the loan term)? You are considering a loan on the following terms: 5/1 ARM: start rate = 5.5%, Index = (SOFR) 4% at loan origination, Margin = 3%, Caps = 3/1/5. 1. What is the interest rate for years 1-5? 2. What is the interest rate in year 6 assuming the index is now 4.75%? 3. What is the interest rate in year 7 assuming the index is now 5% (for the adjustment calculation?) 4. What is the "lifetime" maximum interest rate for this loan (over the loan term)?

Answer rating: 100% (QA)

To calculate the interest rates for different years and the lifetime maximum interest rate for the l... View the full answer