1. Consider a loan with the following terms for an ARM:

0. • Loan Amount = $200,000
   • Starting Rate = 8%
   • Term = 30 Years
   • Adjustment Interval = 1 Year
   • 1% Annual Rate Cap
1. What is the initial monthly payment?
2. What is the loan balance at the end of year 1?
3. Suppose the new composite rate at the beginning of year 2 is 11%. What is the new monthly payment at the beginning of year 2? HINT: read the above information carefully

2. Consider a loan with the following terms for an ARM:

0. • Loan Amount = $150,000
   • Starting Rate = 5%
   • Term = 30 Years
   • Adjustment Interval = 1 Year
   • Payment Cap = 6%
1. What is the initial monthly payment?
2. What is the loan balance at the end of year 1?
3. Suppose the new composite rate at the beginning of year 2 is 8%. What is the new monthly payment at the beginning of year 2? HINT: read the above information carefully

3. Consider the two loan financing alternatives:

Home Value = $180,000

• Two Financing Alternatives
  23. #1: 70% Loan to Value (LTV), 7.5% Interest Rate, 30 Years
  24. #2: 80% Loan to Value (LTV), 8% Interest Rate, 30 Years

1. What are the monthly payments with alternatives 1 and 2?
2. What is the incremental borrowing cost for the additional amount borrowed through alternative 2 (i.e., the loan with the higher LTV)?
3. Suppose you expect to relocate after 11 years, but you do not have the option of a second mortgage. What is the incremental borrowing cost for loan 2?

Does anyone know how to solve these three problems by solving on BA II Plus (N, PV, FV, PMT and I/Y)?