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You are considering an ARM with the following characteristics: Mortgage amount $100,000 1st year contract rate: 7% 2nd year contract rate: 8% Discount points: 3%
You are considering an ARM with the following characteristics: Mortgage amount $100,000
1st year contract rate: 7%
2nd year contract rate: 8%
Discount points: 3%
Loan maturity with monthly payments: 10 year loan.
What is the effective yield if the loan is paid off at the end of year 2?
A. 7.93%
B. 8.23%
C. 8.87%
D. 9.22%
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