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A borrower takes out a 30-year adjustable rate mortgage loan for $300,000 with monthly payments and 3 points. The first two years of the loan
A borrower takes out a 30-year adjustable rate mortgage loan for $300,000 with monthly payments and 3 points. The first two years of the loan have a "teaser" rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would be the effective cost of the loan if it is repaid at the end of year 3?
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4.00%
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6.00%
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5.42%
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5.00%
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