Question
Assume the following items for a one-year adjustable rate mortgage loan (monthly compounding) that is tied to the index rate: Loan amount: $200,000 Annual periodic
Assume the following items for a one-year adjustable rate mortgage loan (monthly compounding) that is tied to the index rate: Loan amount: $200,000 Annual periodic rate cap: 2% Life-of-loan rate cap: 5% Margin: 2.5% First year teaser rate: 4% Amortization term in years: 30 Current index rate: 5.45% Index rate at the end of year 1: 5.0% (forecasted value) Index rate at the end of year 2: 5.25% (forecasted value) Given above assumptions, calculate the follows:
a. Initial monthly mortgage payment.
b. Loan balance at the end of year 1.
c. Year 2 monthly mortgage payment.
d. Year 3 monthly mortgage payment.
(Adjustable rate mortgage calculation)
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