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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: Margin: Periodic Cap: 1-month LIBOR (Currently 0.99% and will increase to 1.90% at the end of the 1st year) 300 basis points 2 percentage points 5 percentage points 30 years with monthly payments and compounding Lifetime Cap: Amortization: 2.99% 8.99% 5.99% 9.90%

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