A 3/1 hybrid ARM is made for $150,000 at 7 percent with a 3D-year maturity.

a. Assuming that fixed payments are to be made monthly for thre~ years and that the loan is fully amortizing, what would be the monthly payments? What will be the loan balance after three years?

b. What would !lew payments be beginning in year 4 jf the interest rate fe ll to 6 percent and the loan continued to be nlily amortizing?

c. In

(a) what would monthly payments be during year I jfthey were interest only? What w~u ld payments be beginning in year 4 if interest rates fe ll to 6 percent and the loan became lu!!y amortizing?

AppendixLO1