What is the lenders yield on the following 1-year adjustable-rate mortgage? What is the lenders expected yield (assume a holding period of term) for the following loan if 1-Year Treasury yields are expected to be 5% today, 8% 12 months from now, and 4% thereafter?

ARM description Rate resets every year.

Fully adjusted rate = Index + 2%.

Index = 1-Year Treasury yield at reset date.

Lifetime Cap of 9% -- the mortgage interest rate can never go above 9%..

Period change cap of 2 percentage points (200 bps) the mortgage interest rate cannot change more than 200 bps at the reset date.

No other caps, floors, or max adjustments.

Teaser rate of 5%

30-year loan with no points or fees.

Loan amount $400,000