A 3/1 ARM is made for $250,000 at 7 percent with a 30-year maturity. Fixed payments are to be made monthly for three years, after which the interest rate will reset.

What would new payments be beginning in year 4 if the interest rate fell to 6 percent and the loan continued to be fully amortizing?

assuming the INTEREST RATE CAP of 2%, what would new payments be beginning in year 4 if the interest rate instead rose to 10%? Hint: the capped rate does not allow the new rate to go above certain point.