Question
An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate = 3% Index = 1-year Treasuries Payments reset each
| An ARM is made for $150,000 for 30 years with the following terms: | ||||||
| Initial interest rate = 3% | ||||||
| Index = 1-year Treasuries | ||||||
| Payments reset each year | ||||||
| Margin = 2 percent | ||||||
| Fully amortizing | ||||||
| Interest rate cap = 1 percent annually; 3 percent lifetime | ||||||
| Estimated forward rates: | ||||||
| BOY 2 | 4.00% | |||||
| BOY 3 | 5.25% | |||||
| BOY 4 | 6% | |||||
| BOY 5 | 6.50% | |||||
| Compute payments and balances for each of the years 1-5. |
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Accounting Principles
Authors: Jerry J Weygandt, Donald E Kieso, Paul D Kimmel
8th Edition
0471980196, 9780471980193
