3. An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate 7 percent Index 1-year Treasuries Payments reset each year Interest rate cap None Payment cap 5 percent increase in any year Fully amortizing; however, negative amortization allowed if payment cap reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2= 7 percent; (BOY) 3= 9.5 percent Compute the following a-payments b-loan balance EOY1 C- payment EOY1 d-loan balance EOY2 e-payment EOY2 based on E how much will the borrower be paying

3. An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate 7 percent Index 1-year Treasuries Payments reset each year Interest rate cap None Payment cap 5 percent increase in any year Fully amortizing; however, negative amortization allowed if payment cap reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=7 percent; (BOY)3=9.5 percent Compute the following a-payments b- loan balance EOY1 c- payment EOY1 d-loan balance EOY2 e- payment EOY2 based on E how much will the borrower be paying 3. An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate 7 percent Index 1-year Treasuries Payments reset each year Interest rate cap None Payment cap 5 percent increase in any year Fully amortizing; however, negative amortization allowed if payment cap reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=7 percent; (BOY)3=9.5 percent Compute the following a-payments b- loan balance EOY1 c- payment EOY1 d-loan balance EOY2 e- payment EOY2 based on E how much will the borrower be paying