Adjustable Rate Mortgage Quiz Helpful definitions: Teaser rate - an artificially low first year rate Margin loan a % number which is added to the index to determine the interest rate on the Index - a widely used rate that is outside the control of an individual lender - usually the 1 year T Bill rate For the following problem, the first year rate with thus be 5%. For the second year the lender the mortgage interest rate would increase to 8.5% [6% (index) plus 2.5% (margin)] but with the annual cap of 2%, the rate can only increase to 7%. Give a $50,000 mortgage with an initial teaser rate of 5%, and a 2.5% margin, with a 2% annual interest rate cap, Assume a 30 year mortgage. The index used for this mortgage is the one year T Bill rate which is 6% for year 2. 1 1. Find the payments for Year 1 Year 2