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Molly Swift has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase anew home. She anticipates owning the home for six years. The

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Molly Swift has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase anew home. She anticipates owning the home for six years. The lender offers Ms. Swift a $150,000, 30 year ARM with the following terms: Initial interest rate 7.5 percent Index 1 year Treasuries Payments adjusted each year Margin-3 percent Interest rate cap-2 % annually/6 % lifetime Payment cap - none Negative amortization- No Discount points-2 percent Based on estimated forward rates computed from the yield curve on U. S. Treasury bills, the index to which the ARM is tied is forecasted to be as follows: beginning of year (BOY) 2-9 percent, BOY 3-7 percent; BOY 4-1l percent; BOY 5-13 percent, BOY 6-12 percent Compute the payments, loan balances, and yield for the ARM for the six year period

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