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

INITIAL INTEREST RATE =7.5 percent

Index=one-year Treasuries

Payments reset each year

Margin=2 percent

Interest rate cap=1 percent annually; 3 percent lifetime

Discount points=2 percent

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

Based on estimated forward rates, the one-year treasury rate 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

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