ZuoTi.Pro
Question

Assume that a lender offers a 30-year, $150,000 adjustable rate mortgage (ARM) with the following terms:...

Assume that a lender offers a 30-year, $150,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate 7.5 percent Index one-year Treasuries Payments reset each year Margin 2 percent Interest rate cap 1 percent annually; 3 percent lifetime Discount points 2 percent Fully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=7 percent; (BOY) 3=8.5 percent; (BOY) 4=9.5 percent; (EOY) 5=11 percent. Compute the payments, loan balances, and yield for the ARM for the five-year period.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Assume that a lender offers a 30-year, $150,000 adjustable rate mortgage (ARM) with the following terms:...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Molly Swift has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase anew home....

    Molly Swift has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase anew home. She anticipates owning the home for six years. The lender offers Ms. Swift a $150,000, 30 year ARM with the following terms: Initial interest rate 7.5 percent Index 1 year Treasuries Payments adjusted each year Margin-3 percent Interest rate cap-2 % annually/6 % lifetime Payment cap - none Negative amortization- No Discount points-2 percent Based on estimated forward rates computed from the yield curve...

  • 2. An ARM is made for $50,000 for 30 years with the following terms Initial interest...

    2. An ARM is made for $50,000 for 30 years with the following terms Initial interest rate 1 percent Paymen Interest rate cap -none Discount points point Negative amortization is not allowed Index 1-year Treasuries Margin 200 basis points ts reset each year Payment cap-none Based on estimated forward rates, the 1-year Treasury yields to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2-one percent (1%); (BOY) 3-two percent (2%); (BOY) 4-35%; (BOY) 5-5% Compute...

  • Jennifer has just borrowed $100,000 to buy a home on a 30-year, adjustable rate mortgage(ARM). The...

    Jennifer has just borrowed $100,000 to buy a home on a 30-year, adjustable rate mortgage(ARM). The benchmark index is LIBOR which is currently at 2.5%. Her margin is 2% and the loan has caps of 1% annually, and 5% lifetime. While her initial rate should be 4.5%, the lender has granted her a "teaser" rate of 4% for the first year. Assuming that the periodic cap applies to any initial rate, including the teaser rate, if LIBOR rises 1 1/2%...

  • Suppose that you are thinking about taking out an adjustable rate loan (ARM) with the following...

    Suppose that you are thinking about taking out an adjustable rate loan (ARM) with the following information:                Teaser Rate: 3.5%        Margin: 4.0%        Year 1 TSY Strip Index: 2.0% Year 2 TSY Strip Index: 3.5% Year 3 TSY Strip Index: 1.5% Periodic Cap: 1.0% Lifetime Cap: 5.0% Caps are NOT based off of the Teaser A)What is the interest rate in the 1st year of the loan? 3.5% 5.5% 6.0% 7.5% None of the above B)What is the interest rate...

  • A basic ARM is made for $500, 000 at an initial interest rate of 3% with...

    A basic ARM is made for $500, 000 at an initial interest rate of 3% with 2 discount points for 10 years. Payments are to be reset each year. The borrower believes that the interest rate at the beginning of year 2 will increase to 9 percent. Assuming that fulling amortizing is made and negative amortization is allowed if payment cap reached. If the ARM loan has a maximum 5% annual increase payment cap, what is the expected yield to...

  • Question 16 Which of the following adjustable rate mortgage (ARM) options can potentially lead to negative...

    Question 16 Which of the following adjustable rate mortgage (ARM) options can potentially lead to negative amortization? Minimum payment option None is the correct answer Interest only option 30-year fully amortizing option 15-year fully amortizing option

  • 1) Which of the following is not true for a 5/1 Adjustable Rate Mortgage (ARM). A)...

    1) Which of the following is not true for a 5/1 Adjustable Rate Mortgage (ARM). A) is a mortgage in which the rate is adjustable for 5 years B) in the sixth year, the loan becomes an ARM C) the new rate is determined by an economic index D) a predetermined margin is usually between 2.25-3.0% E) An adjustment interval is the period between potential rate changes 2) In A(n) _____ arrangement, the borrower may end up making payment to...

  • A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The...

    A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a “teaser” rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year 3 monthly payment be? a. $955 b. $1,071 c. $1,067 d. $1,186 e. Because of the rate cap, the payment would not change.

  • rate of 5.25%, 1 Lender I offers you a fixed rate 15-year mortgage at an annual...

    rate of 5.25%, 1 Lender I offers you a fixed rate 15-year mortgage at an annual interes compounded monthly, with no points a. F ind your monthly payments under this option. b. Find the total amount of money paid to the lender. c. Find the total amount of interest you will pay over the life of the loan. 2. Lender II offers you a fixed rate 30-year mortgage at an annual interest rate of 5.75%, compounded monthly, with one point...

  • Consider a 30-year adjustable rate mortgage (ARM), which requires the borrower to make monthly payments at...

    Consider a 30-year adjustable rate mortgage (ARM), which requires the borrower to make monthly payments at the end of each month. The mortgage amount is $432,000 and the APR on the mortgage is 3.65% for the first 10 years and then 3.87% for the next 20 years. Prepare a loan amortization schedule for this mortgage. Assume that the mortgage closing date is October 1, 2018. Among other things, the following columns should be included. (50) (i) Date (ii) Beginning Balance...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT