A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. 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 the Year 3 monthly payment be? (Hint: the new rate is 5% per year, or 5% / 12 per month. You need to first calculate the monthly PMT with teaser rate, and the loan balance at the end of Year 2 or month 24, then for the new loan, the rate is 5%/12 per month, nper is 28 * 12, PV is the loan balance at the end of month 24)

A) $955 B) $1,067 C) $1,071 D) $1,186