1) An adjustable rate mortgage with a start rate of 1.5%, an index of the 11 th District COFI, a margin of 2.5%, and periodic and lifetime caps of 1/5 with semi- annual adjustments, would have a maximum interest rate of what at the beginning of the third loan year if the 11th District COFI is then 7.0%?

a) 5.5%

b) 6.5%

c) 8.5%

d) 9.5%

2) If a senior homeowner want to put a reverse annuity mortgage (RAM) on her property that currently appraise for $750,000 so that she will receive a monthly payment from the lender of $1,800 for the rest of her life, and if her lender's RAM program charges 6.5% annual interest compounded monthly, what will be the loan balance when the borrower dies after 22 years if the loan is not capped at the current appraised value?

a) $252,476

b) $750,000

c) $1,050,958

d) $2,070,995