Assume that a lender offers a 30-year, $150,000 adjustable rate mortgage (ARM) with the following terms:

Initial interest rate=7.5 percentIndex=one-year TreasuriesPayments reset each yearMargin=2 percentInterest rate cap=1 percent annually; 3 percent lifetimeDiscount points=2 percentInitial interest rate=7.5 percentIndex=one-year TreasuriesPayments reset each yearMargin=2 percentInterest rate cap=1 percent annually; 3 percent lifetimeDiscount points=2 percent

Fully amortizing; however, negative amortization allowed if interest rate caps reached

Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year

(BOY) 2=7 percent; (BOY) 3=8.5 percent; (BOY) 4=9.5 percent; (EOY) 5 = 11 percent.BOY 2=7 percent; BOY 3=8.5 percent; BOY 4=9.5 percent; EOY 5 = 11 percent.

Compute the payments, loan balances, and yield for the ARM for the five-year period.

SHOW WITH EXCEL FORMULAS PLEASE.