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The initial rate on a 3/1 ARM is 3%. The loan has a margin of 2.5%, a 2% per year cap, and a 6% lifetime

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The initial rate on a 3/1 ARM is 3%. The loan has a margin of 2.5%, a 2% per year cap, and a 6% lifetime cap. At origination, the index (1-year T-Bill) is 1%. If the index is 3% at the end of year three, then the rate charged in year four will be 5.5% 6.5% 5% 4.5%

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