A basic arm is made for 200000 at an initial interest rate, Ask an Expert

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A basic ARM is made for $200,000 at an initial interest rate of 6% for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year 2 will increase to 7%. Assuming that a fully amortizing loan is made, what will monthly payments be during year 1? What will the loan balance be at the end of year 1 ?

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