ZuoTi.Pro
Question

If an ARM has a margin of 2.5 and the start rate is 4% and caps of 2/2/5 and the index at the first adjustment is 5, wha...

If an ARM has a margin of 2.5 and the start rate is 4% and caps of 2/2/5 and the index at the first adjustment is 5, what is the rate?

A. 6% B. 7.5% C. 9% D. 6.5%

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

Homework Answers

Answer #1

The ARM has cap of 2/2/5 so for the first adjustment period, it can increase by a maximum of 2%.

So, the rate will be 4% + 2% = 6%. (option A)

It cannot be index rate + margin (i.e. 5%+2.5% = 7.5%) because it is higher than the current rate + cap which is 6%.

0 0
Add a comment
Know the answer?
Add Answer to:
If an ARM has a margin of 2.5 and the start rate is 4% and caps of 2/2/5 and the index at the first adjustment is 5, wha...
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

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 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%...

  • 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...

  • 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...

  • 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...

  • Five years ago, a borrower took out 5/1 ARM in the amount of $300,000. With the...

    Five years ago, a borrower took out 5/1 ARM in the amount of $300,000. With the start rate on the loan at 4%, the principal and interest payment has been $1,432.25. It’s time for the first interest rate adjustment. Based on the current index rate and the terms of the promissory note, you determine that the borrower's new rate will be 6%. The current principal balance on the loan is $271,342. First, calculate the amount of the new payment that...

  • 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...

  • FIGURE 12-7 2.5 cm 30.0 cm Elbow joint 21) Assuming the lower arm has a mass...

    FIGURE 12-7 2.5 cm 30.0 cm Elbow joint 21) Assuming the lower arm has a mass of 2.8 kg and its CG is 12 cm from the elbow-joint pivot,21 how much force must the extensor muscle in the upper arm exert on the lower arm to hold a 7.5 kg shot put (Fig. 12-7)? E) 1000 N D) 100 N C) 500 N B) 1500 N A) 750 N .80

  • Factor 1 4 4 Type Pipe Elbows Tees Caps Reducers Flange Pairs Valves 2 2 8...

    Factor 1 4 4 Type Pipe Elbows Tees Caps Reducers Flange Pairs Valves 2 2 8 8 Given a 1/2 inch pipe system with centerline to centerline total length of 9-5", 2 elbows and 3 valves, what is the weighted insulation quantity? Select one a. 35.7 b. 12.3 O c. 41.4 d. 60.8

  • Betty, is the machine that makes baseball caps still jumping out of sequence, or has it...

    Betty, is the machine that makes baseball caps still jumping out of sequence, or has it stopped? Break-even analysis should help us in this situation. What symptoms have you observed that indicate the team has a problem? We brainstorm to solve problems. I don’t understand what the new owners are trying to accomplish. 1. a. step 1 2. b. step 2 3. c. step 3 4. d. step 4 5. e. step 5 6. f. step 6

  • Draw the structures of the Compounds 2.0 3.64 Unsat. Index = (2C+2-H-X +N)/2 = 1.5 1.06...

    Draw the structures of the Compounds 2.0 3.64 Unsat. Index = (2C+2-H-X +N)/2 = 1.5 1.06 6.86 7.00 d = 2.44 ppm, Compound 18a. C, H, N quartet, 2H 1.0 7.02 6.84 2.43 2.45 1.08 1.04 a = 7.01 ppm, c = 3.64 ppm, b = 6.85 ppm, 0.5 doublet, 2H doublet, 2H singlet, 2H e = 1.06 ppm, 2.41 2.47 triplet, 3H 8, ppm 0.0 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 20 1.5...

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