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Suppose that you have just borrowed $100,000 using an adjustable-rate mortgage. Suppose that the payment is scheduled to adjust at the end of every year.

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Suppose that you have just borrowed $100,000 using an adjustable-rate mortgage. Suppose that the payment is scheduled to adjust at the end of every year. Use the information provided below to calculate the maximum interest rate that the lender can charge over the life of the loan. Index rate: 1-month LIBOR (Currently 0.99% and will increase to 1.90% at the end of the 1st year) Margin: 300 basis points Periodic Cap: 2 percentage points Lifetime Cap: 5 percentage points Amortization: 30 years with monthly payments and compounding

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