Are either of the caps violated and what is the percentage, Ask an Expert

Finance

Adjustable Rate Mortgage (ARM)

Fill out the following table based on the assumptions below. Identify if and in which years the caps are violated. What is the percentage change in your monthly payment during the first 5 years of the ARM? ASSUME THE INTEREST ADJUSTS EVERY YEAR.

Assumptions
Loan Amount	$250,000			Caps
Term	30			Periodic	1%
Margin	2.50%			Overall	6%
Monthly Compounding

Year	1	2	3	4	5
Index	1.00%	1.25%	1.30%	1.50%	2.75%
Teaser Rate	3.25%
Interest Rate
Loan Balance
Monthly Payment

a) Are either of the caps violated? In which years?

b) What is the percentage change in monthly payment from year 1 to year 5?

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Corporate Finance, Finance

Category:- Corporate Finance
Reference No.:- M9487587

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