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Suppose you take a 30-year, one-year adjustable, monthly payment ARM of $135,000 with two discount points. Your payment in year one is $943.94, your payment

Suppose you take a 30-year, one-year adjustable, monthly payment ARM of $135,000

with two discount points. Your payment in year one is $943.94, your payment in year two

is $1,131.67, and your outstanding balance at the end of year two is $132,843. If you

repay the loan at the end of year two, what is the effective cost?

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