6. A household takes out a fully amortized adjustable-rate loan for $640,000 over a 25 year term at an initial rate of 4.2%. After 3 years the interest rate increases to 6.2%. How much do the monthly repayments increase by? a) $676.60 b) $528.44 c) $502.69 d) $443.80

Future Value: Present Value: Equivalent Annual Interest Rate: Present Value-Annuity: Present Value-Annuity: Fully Amortizing Loan Repayments: Partial Amortizing Loan Repayments: FVn=PV0(1+r)n PV0=(1+r)nFVn=FVn[(1+r)n1] EAIR=[1+mr]m1 PV=C[r1r(1+r)t1] PV=C[r1r(1+r)t1] PMT=P[1(1+i/12)1i/12] P(1+i/12)iFV PMT=[i/121i/12(1+i/12)t1](1+i/12 Partial Amortizing Loan Outstanding Balloon Payment: FV=P(1+i/12)PMT[i/12(1+i/12)t1] Definitions for mortgage formulas: PMT = monthly repayments, P= initial outstanding principal, FV= Balloon Balance, i= Nominal Annual Interest Rate, t= number of periods