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Thank you Suppose that you are considering taking out an adjustable-rate mortgage with the following terms: Amount borrowed: $625,000 Index rate: Prime Rate (Currently 4.25%)

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Suppose that you are considering taking out an adjustable-rate mortgage with the following terms: Amount borrowed: $625,000 Index rate: Prime Rate (Currently 4.25%) Margin: 200 basis points. Periodic cap: 1.5 percentage points Lifetime cap: 5 percentage points Amortization: 25 years If the interest rate changes at the end of every year and the prime rate falls to 3.60% during the rst year, what will your payment be in year 2

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