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2. Suppose you take a 3/1 interest-only, 30-year ARM for $225,000 with an interest-only contract rate of 4.25% and a following rate of 6.25% in
2. Suppose you take a 3/1 interest-only, 30-year ARM for $225,000 with an interest-only contract rate of 4.25% and a following rate of 6.25% in year four. Assume you pay two discount points. A. (1 pt) What is your payment for the interest-only period? B. (1 pt) What is the subsequent payment to fully amortize the debt over its stated term? Answer C. (1 pt) What would be the effective cost if the loan is repaid at the end of year 4
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