Q3. A family just signed the sales agreement to purchase a home at the asking price of $625,000. They decided to use their savings as the 10% down payment and finance the remaining with a 30-year FRM mortgage loan at an annual interest rate of 5.875%. What would be the monthly payment? What would be the annual payment if this loan is annually amortized?

Q4. A mortgage company offers borrowers a 4% annual interest rate on the one-year ARM that is amortized for 30 years. The index rate is forecast to be 5% for next year and the margin on this loan is 2%. The annual interest rate adjustment cap is 2%. What is the adjusted interest rate for the second year? What are the monthly payments for year 1 and 2 if $200,000 is borrowed? (Remember to use the balance as the new PV for 2^nd year.)