1. Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one-year Treasury rate:

Loan amount: $200,000

Annual rate cap: 1%

Life-of-loan cap: 4%

Margin : 2.50%

First-year teaser rate: 5.50%

One-year Treasury rate at end of year 1: 5.25%

One-year Treasury rate at end of year 2: 5.50%

Loan term in years: 15

Given these assumptions, calculate the following:

1. Initial monthly payment
2. Loan balance end of year 1
3. Year 2 contract rate
4. Year 2 monthly payment
5. Loan balance end of year 2
6. Year 3 contract rate
7. Year 3 payment