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Question 30-31 use the following information: Suppose you are considering a 30-year ARM of $180,000 with the following characteristics: Index: 1-year Treasury Bill yield Margin:
Question 30-31 use the following information:
Suppose you are considering a 30-year ARM of $180,000 with the following characteristics:
- Index: 1-year Treasury Bill yield
- Margin: 2.5%
- Annual cap: 1.5%
- Lifetime cap: 5%
- Your interest rate is reset annually
The index to which the ARM is tied to will take the following values:
The index to which the ARM is tied to will take the following values:
Year | One-year Treasury Bill yield |
At signing the contract | 2.5% |
End of year 1 | 4% |
End of year 2 | 6% |
Question 31 (4 points)
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What is the interest rate for year 3?
Question 31 options:
6% | |
8% | |
8.5% | |
9.5% |
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