it is very important that you show your work from the calculations (right down what you used as PV, i FV, n, cash flows,.....etc. in your calculation)

a. Given the following information, which ARM should have the lowest initial interest rate? ARM1 ARM2 ARM3 % Margin above index 3% 2% 3% Adjustment Interval 6 months 1 year 1 year Interest Rate Cap None 1% per year None (The three ARMs are identical in all other aspects) Briefly explain your answer! (2points)