Question
Tim wants to buy an apartment that costs $750,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser
Tim wants to buy an apartment that costs $750,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 3.75%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. The index was 1% at the time of origination. Tim also had to pay 3 points for this loan. Compute the true APR (annualized IRR) for this loan.
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Financial Markets And Institutions
Authors: Jeff Madura
6th Edition
0324162618, 978-0324162615
