Question
Please help with explaining the answer from suggestions below. thanks. Based on this information on an Adjustable-Rate Mortgage, answer the following question: What is the
Please help with explaining the answer from suggestions below. thanks.
Based on this information on an Adjustable-Rate Mortgage, answer the following question:
What is the lifetime cap (ceiling) and lifetime floor for the interest rate?
- Index at the First-Rate Change = 6 % (LIBOR)
- Margin = 2%
The interest rate required to pay at the first-rate change will not be greater than 7% or less than 4.
Thereafter, there will never increase or decrease on any single date change by more than three percentage points from the interest rate in the preceding 12 months
The interest rate will never be greater than 12% or less than the margin.
- 6% cap and 2% floor
- 7% cap and 4% floor
- 12% cap and 2% floor
- 12% cap and 4% floor
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
