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Assume you borrow an ARM of $80,000 for 30 years. Given initial interest rate=5%, margin-2%. index rate at EOY1= 6%, EOY2-4.5%, an annual rate cap=2%,

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Assume you borrow an ARM of $80,000 for 30 years. Given initial interest rate=5%, margin-2%. index rate at EOY1= 6%, EOY2-4.5%, an annual rate cap=2%, and the lender charges 3 points upfront, what is the appropriate interest rate to determine payment for year 2? 5% 6% 7% 8%

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