Tim wants to buy an apartment that costs $1,750,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 4.875%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. Tim anticipates the index to be 3.50% at the time of the 1st reset.

If the index resets to 3.50% as Tim forecasts, what will his new mortgage payment be in year 4?