Question 1) You decide to take an ARM. Your interest rate is tied to the one-year Treasury rate(index rate) and your risk premium is 2%. If the one-year Treasury rate now is 1.03%, what is your interest rate for the coming year? option

a) 3.53% b) 2.50% c) 1.03% d) 1.47%

Which one is the answer?

Question 2)

You take a 3/1 interest - only ARM for $100,000, monthly payments, 30-year term. The initial interest rate is 6% for the first 3 years. What is your monthly payment for the first 3 years?