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1. Sean and Teresa take out a 20-year adjustable-rate mortgage (ARM) for $450,000. The terms are 11/1. Initially, the interest rate is 3.2% compounded monthly.

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1. Sean and Teresa take out a 20-year adjustable-rate mortgage (ARM) for $450,000. The terms are 11/1. Initially, the interest rate is 3.2% compounded monthly. a. What is their initial monthly payment? b. After 11 years, what will the present value of the mortgage be? c. After 11 years, the interest rate increases to 5.9%. What will their new monthly payments be? 2. Alicia wants to buy a house. She decides she can afford a monthly mortgage payment of up to $1,100. A bank offers Alicia a 30-year mortgage at 4.4% interest (compounded monthly). What is the largest mortgage Alicia can get with a monthly payment of $1,100? (Round to the nearest dollar.)

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