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A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five
A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $148,000,30-year fully amortizing ARM with the following terms: Initial interest rate =6 percent Index =1-year Treasuries Payments reset each year Margin =2 percent Interest rate cap= None Payment cap = None Negative amortization = Not allowed Discount points =2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=9 percent; (BOY)3=10.5 percent; (BOY)4=11.5 percent; (BOY)5= 13 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Compute the payments and loan balances for the unrestricted ARM for the five-year period. (Do not calculations. Round "Payments" to 2 decimal places and "Loan Balance" to the nearest dollar amount
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