A borrower takes out a 30-year adjustable rate mortgage loan for $280,000 with monthly payments (no fees). The first year of the loan has a "teaser" rate of 2.1%. After that, the rate can reset each year with a 2% maximum rate adjustment "cap". At the end of Year 1, interest rates go way up - to 9%. What would the Year 2 monthly payment be? (Hint: Multiple steps) (Ch 5)

a. $1,343

b. $1,266

c. $931

d. $1,066