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What is the yield on the following 1 - year adjustable rate mortgage? What is the lenders expected yield ( assume a holding period of

What is the 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, 6%24 months from now, and 4% thereafter?
ARM description
Rate resets every year.
Fully adjusted rate = Index + Margin
Margin =3%.
Index =1-Year Treasury yield at reset date.
Lifetime Cap of 9%.
Per Period change cap of 2 percentage points (200 bps)
No other caps, floors, or max adjustments.
Teaser rate of 5%
30-year loan with no points or fees.
Loan amount $400,000
Fill out this table:
Mortgage Interest Rate Fully Adjusted Rate Index Margin
M 01-12
M 13-24
M 24-36
M 37-360
Find the payments:
Months 1-12:
Months 13-24:
Months 25-36:
M 37-360:
Calculate the rate of return for the lender:
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