You are looking to finance your home. The bank is offering a three-year ARM (adjustable-rate mortgage) with an introductory rate of 3.40%. It has an adjustment cap of 3.00% per adjustment period with a lifetime adjustment of 8.00%. The rate is 4.00% over the one-year LIBOR rate which is currently 1.25%.

What will your interest rate be after three years if the LIBOR rate does not change? (Round your answer to 2 decimal places.)

In three years, what is the maximum interest rate you could be charged? (Round your answer to 2 decimal places.)

If LIBOR increases 1.00% per year for the next 10 years up to 11.25%, what is the maximum interest rate you will pay? (Round your answer to 2 decimal places.)

When will that rate take effect?

- Ending of year 10

or

- Beginning of year 10