Question
The following information is to be used to answer Question 7 & 8 Suppose that you have decided to purchase a house for $400,000 using
The following information is to be used to answer Question 7 & 8 Suppose that you have decided to purchase a house for $400,000 using an adjustable-rate mortgage with the terms provided below. Loan-to-value ratio: 90% Index rate: one-year Treasury yield (currently 3.00%) Margin: 250 basis points Amortization: 15 years with monthly payments and compounding Annual cap: 1.5 percentage points Lifetime cap: 5 percentage points Adjustment period: Annually Teaser Rate 2.50%
7. What is the monthly payment during the first year of the loan?
a. $2133.73 b. $2400.44 c. $2667.16 d. $3268.33 e. None of the above
8. If the yield on one-year Treasuries increases by 2.62% during the first year, what will your payment be during the second year of the loan?
a. $2152.11 b. $2270.14 c. $2826.71 d. $3180.05 e. None of the above
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