Consider a 5/1 ARM with a loan amount of $375,000, a 30-year term, and an...
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Consider a 5/1 ARM with a loan amount of $375,000, a 30-year term, and an initial interest rate of 5.25%. Fixed monthly payments are to be made for seven years, and the loan is fully amortizing. (a) What will the monthly payments be for the first five years? What will the loan balance be after five years? (b) What will the payment amount be starting in year six if the interest rate drops to 3.85%? What will the loan balance be after six years? (c) What will the payment amount be starting in year seven if the interest rate rises to 6.45%?
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