Question
You have the following two mortgage choices: Fixed-rate Mortgage and a 2/1 Interest-only ARM. The Mortgage Amount for both is $100,000. The terms for both
You have the following two mortgage choices:
Fixed-rate Mortgage and a 2/1 Interest-only ARM. The Mortgage Amount for both is $100,000. The terms for both is 3 years with annual PMT. The payment rises each year. Discount Points for both is 0. Costs with Loan Orignation is $1,000 for both. The Initial Contract Interest Rate for the FRM is 11.00% and 10.00% for the ARM. The Margin for the ARM is 2.00% with no annual cap and a 3% lifetime cap. The Market Index for End of Year (EOY) 1 is 7.0% and 4.5% for EOY 2.
Calculate APR for each mortgage choice?
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