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If an ARM is priced with an initial interest rate of 8 percent and a margin of 2 percent (when the ARM index is also 8 percent at origination) and a fixed rate mortgage (FRM) with constant payment is available at 11 percent, what does this imply about inflation and the forward rates in the yield curve at the time of origination?

What is implied if a FRM were available at 10 percent? 12 percent?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92081887

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