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8. Tim wants to buy an apartment that costs $2,225,000 with an 85% LTV mortgage. Tim...

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Finance

8. Tim wants to buy an apartment that costs $2,225,000 with an85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaserrate of 3.75%. The reset margin on the loan is 300 basis pointsabove 1 year CMT. There are no caps. The index was 1% at the timeof origination. Tim also had to pay 6.5 points for this loan.

Compute the true APR (annualized IRR) for this loan.

Answer & Explanation Solved by verified expert
3.8 Ratings (714 Votes)
Final answer Annualized IRR 450Detailed solution follows31 ARM means fixed rate for first three years and variable ratefrom fourth    See Answer
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