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%