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Douglas is considering an ARM with the following characteristics: Mortgage Amount = $100,000, Index Yield for Year 1 = 6%, Margin = 2.5%, Annual Cap

Douglas is considering an ARM with the following characteristics: Mortgage Amount = $100,000, Index Yield for Year 1 = 6%, Margin = 2.5%, Annual Cap = 2%, Lifetime Cap = 6%, Loan Maturity = 30 years, Inflation for the next year is 1.5% and the Teaser Rate is 6%. What is the balance at the end of year two?

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