1. Consider the following information regarding an ARM loan: the index for year one is 4%, the index for year two is 7%, the index for year three is 7%, the margin is 2%, the lifetime cap is 6%, the annual cap is 2%, and the first-year-only teaser is -1%. What is the contract rate for year one?

2. Consider the following information regarding an ARM loan: the index for year one is 6%, the index for year two is 7%, the index for year three is 7%, the margin is 2%, the lifetime cap is 6%, the annual cap is 2%, and the first-year-only teaser is -1%. The maximum interest rate allowable during the life of the mortgage is?