Question
Sharonborrows an adjustable rate loan (ARM)of $100,000 with 3 yearloan maturity.The initial interest rate for the loanis 8.5%, the margin is 3%, the loan amortization
Sharonborrows an adjustable rate loan (ARM)of $100,000 with 3 yearloan maturity.The initial interest rate for the loanis 8.5%, the margin is 3%, the loan amortization period is 15 years, the frequency of adjustment is 1 year (monthly compounding).There will be adiscount point of3% for the loan. Also,the index rates for the next 2 years are 11% and 8%, respectively. NOW suppose there is an annual interest rate cap of 2% specified in the loan contract, what will be the effective mortgage yield for borrowing this loan?
| A. | 11.85% |
| B. | 11.42% |
| C. | 12.08% |
| D. | 11.12% |
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Real Estate Finance and Investments
Authors: William Brueggeman, Jeffrey Fisher
14th edition
73377333, 73377339, 978-0073377339
