Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A reset mortgage allows for one interest rate reset during the life of the loan. The mortgage rate will be reset after 6 years, to

  1. A reset mortgage allows for one interest rate reset during the life of the loan. The mortgage rate will be reset after 6 years, to fully amortize at the end of the original 30 year period (i.e. after 24 more years). For a 6.625%, $100,000, mortgage, please compute the reset payment if the new rate resets to 7.375%. (Hint: calculate how much balance is left after you pay for 6 years at the rate of 6.625%, then use the left balance as the new PV, pay it off for the rest of the 24 years @ the rate of 7.375%). Assuming monthly compounding.

First six years: 1-INPUT, 72-AMORT.

a. 450.76

b. 489.11

c. 652.37

d. 683.93

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Issues In Quantitative Finance

Authors: Ahmet Can Inci

1st Edition

1032101121, 978-1032101125

More Books

Students also viewed these Finance questions