1) Eileen takes out a 3/1 ARM with 3/4/5 caps. The initial teaser rate on the mortgage is 2.5% and the mortgage is indexed to 1 year CMT with a margin of 2%. Suppose that at the first reset the 1 year CMT is at 4%. What will be Eileen's interest in year 4? (Write the answer as a percent so for example 2.5% should be written as 2.5, not as 0.025)

2) Joan takes out a 5/1 ARM with 2/4/6 caps. The initial teaser rate on the mortgage is 2% and the mortgage is indexed to 1 year CMT with a margin of 2%. What is the maximum interest that Joan might pay on this mortgage? (Write the answer as a percent so for example 2.5% should be written as 2.5, not as 0.025)