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You have decided to buy a 2,250 square-feet house in Denton, close to a good public school. The average price in the area is $190 per square feet. The bank will finance 100% of the house value, so you do need savings for down payment. You sign a 20-year 2/1 adjustable rate mortgage (ARM), which carries a 3.8% fixed rate for the first 2 years, and then (after 2 years) is adjusted to the 1 -year LIBOR +0.75%. Compute your monthly payments in 2 years (month 25 ) if the LIBOR is 4% $2,625 $2,388 $2,194