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A) Douglas is considering an ARM with the following characteristics:Mortgage Amount = $100,000, Index Yield for Year 1 = 6%, Margin = 2.5%, Annual Cap

A)

Douglas is considering an ARM with the following characteristics:Mortgage Amount = $100,000, Index Yield for Year 1 = 6%, Margin = 2.5%, Annual Cap = 2%, Lifetime Cap = 6%, Loan Maturity = 30 years, Inflation for the next year is 1.5% and the Teaser Rate is 6%.What is the balance at the end of year two?

B.

Boone is considering an ARM with the following characteristics:Mortgage Amount = $250,000, Teaser Rate = 7.75%, Index Value = 8.75%, Inflation Rate for the Index = 1.5% per Year, Margin = 2.0%, Annual Cap = 1%, Lifetime Cap = 5%, Loan Maturity = 15 Years.What is the balance at the end of year three?

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