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 $141,000, 30-year fully amortizing ARM with the following terms:

Initial interest rate = 6 percent Index = 1year 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.

Req A Req B Compute the payments and loan balances for the unrestricted ARM for the five-year period. (Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance" to the nearest dollar amount.) Payments Loan Balance Year 1 Year 2 Year 3 Year 4 Year 5