LOAN 1 LOAN 2 LOAN 3 LOAN 4 Initial Interest Rate ? ? ? ? Loan...
| LOAN 1 | LOAN 2 | LOAN 3 | LOAN 4 | |
| Initial Interest Rate | ? | ? | ? | ? |
| Loan Maturity (years) | 20 | 20 | 20 | 20 |
| % Margin Above Index | 2% | — | 3% | 3% |
| Adjustment Interval | 1 yr. | — | 1 yr. | 1 yr. |
| Points | 1% | 1% | 1% | 1% |
| Interest Rate Cap | NONE | — | 1%/yr. | 3%/yr. |
Which loan in the above table should have the lowest initial interest rate?
Group of answer choices
Loan 2
Loan 3
Loan 4
Loan 1
Homework Answers
Option , Loan 1
Reason: Since it has no interest cap and margin above index is also the lowest.
finance Loan 1 Loan 2 Loan 3 Loan 4 Initial Interest Rate Loan Maturity (years) 20...
finance
Loan 1 Loan 2 Loan 3 Loan 4 Initial Interest Rate Loan Maturity (years) 20 20 20 % Margin Above Index 3% 3% N/A 3% Adjustment Interval 1 yr. 1 yr. N/A 1 yr. Points 1% 1% 1% 1% Interest Rate Cap None 3%/yr. 1%/yr. N/A Which loan is an unrestricted ARM? Loan 1 Loan 2 Loan 3 O Loan 4
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...
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...
it is very important that you show your work from the calculations (right down what you used as PV, i FV, n, cash flows,...
it is very important that you show your work from the
calculations (right down what you used as PV, i FV, n, cash
flows,.....etc. in your calculation)
a. Given the following information, which ARM should have the lowest initial interest rate? ARMI ARM2 ARM3 % Margin above index 3% 2% 3% Adjustment Interval 6 months 1 year lyear Interest Rate Cap None 1% per year None (The three ARMs are identical in all other aspects) Briefly explain your answer! (2points)
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...
Loan Amount: $10,000,000.00 Interest Rate: 6-3/4% Amortization:  
Loan Amount: $10,000,000.00 Interest Rate: 6-3/4% Amortization: 30 years Term: 10 years Assume the above loan is interest only for the first three (3) years. What is the Annual Debt Service (ADS) in the first year? How much interest (cumulative) will have been paid at the end of year 3? How much principal will be due at maturity? How much interest will have been paid over the 10 year term?
David is considering an adjustable rate mortgage loan with the following characteristics: • Loan amount: $250,000...
David is considering an adjustable rate mortgage loan with the following characteristics: • Loan amount: $250,000 • Term: 30 years • Index: one year T-Bill • Margin: 2% • Periodic cap: 2% • Lifetime cap: none • Negative amortization: not allowed • Financing costs: 1 discount point and $5,500 in origination fees. The Treasury bill yield is 6% at the outset and is expected to increase to 8% at the beginning of the second year and to 13% at the...
2 5. What is the rate of interest on a 1 year loan starting 3 years...
2 5. What is the rate of interest on a 1 year loan starting 3 years from now, implied by the following term structure: (i) A 1-year zero coupon bond has a yield to maturity of 1%, (ii) A 2-year zero coupon bond has a yield to maturity of 2%, (iii) A 3 year zero coupon bond has a yield to maturity of 3%, (iv) A 4-year zero coupon bond has a yield to maturity of 4% a. 1% b....
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...
Loan interest For the loan amount, interest rate, annual payment, and loan term shown in the...
Loan interest For the loan amount, interest rate, annual payment, and loan term shown in the following table, calculate the annual interest paid each year over the term of the loan, assuming that the payments are made at the end of each year. Amount Interest rate $27,0009 % Annual payment $8,334.05 Term 4 years The portion of the payment that is applied to interest in year 1 is $2430. (Round to the nearest cent.) The portion of the payment that...
finance
Loan 1 Loan 2 Loan 3 Loan 4 Initial Interest Rate Loan Maturity (years) 20 20 20 % Margin Above Index 3% 3% N/A 3% Adjustment Interval 1 yr. 1 yr. N/A 1 yr. Points 1% 1% 1% 1% Interest Rate Cap None 3%/yr. 1%/yr. N/A Which loan is an unrestricted ARM? Loan 1 Loan 2 Loan 3 O Loan 4
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...
it is very important that you show your work from the
calculations (right down what you used as PV, i FV, n, cash
flows,.....etc. in your calculation)
a. Given the following information, which ARM should have the lowest initial interest rate? ARMI ARM2 ARM3 % Margin above index 3% 2% 3% Adjustment Interval 6 months 1 year lyear Interest Rate Cap None 1% per year None (The three ARMs are identical in all other aspects) Briefly explain your answer! (2points)
2 5. What is the rate of interest on a 1 year loan starting 3 years from now, implied by the following term structure: (i) A 1-year zero coupon bond has a yield to maturity of 1%, (ii) A 2-year zero coupon bond has a yield to maturity of 2%, (iii) A 3 year zero coupon bond has a yield to maturity of 3%, (iv) A 4-year zero coupon bond has a yield to maturity of 4% a. 1% b....
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...
Loan interest For the loan amount, interest rate, annual payment, and loan term shown in the following table, calculate the annual interest paid each year over the term of the loan, assuming that the payments are made at the end of each year. Amount Interest rate $27,0009 % Annual payment $8,334.05 Term 4 years The portion of the payment that is applied to interest in year 1 is $2430. (Round to the nearest cent.) The portion of the payment that...
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