Question: you have a choice between a 30-year fixed rate loan and an adjustable rate mortgage (arm) with a first year rate of 2%. Neglecting compounding

you have a choice between a 30-year fixed rate loan and an adjustable rate mortgage (arm) with a first year rate of 2%. Neglecting compounding and changes in principal,estimate your .monthly savings with the arm during the first year on a $150,000 loan. Suppose that the arm rate rises to 10.5% at the start of the third year. Approximately how much extra will you then be paying over what you have paid if you had taken the fixed rate loan?

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