Suppose you considering an ARM with the following characteristics: Mortgage amount $2,000,000 Index 1-year Treasury Bill yield Margin 2.50 Maximum annual adjustment 2% Lifetime interest...

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Finance

Suppose you considering an ARM with the followingcharacteristics:
Mortgage amount
$2,000,000
Index
1-year Treasury Bill yield
Margin
2.50
Maximum annual adjustment
2%
Lifetime interest cap
6%
Discount points
2.00
Loan maturity
30 years
If the Treasury Bill yield is currently 6 percent, what is themonthly payment for the first year?
If the index moves to 7.5 percent at the end of the first year,what is the monthly payment for year 2.
If the loan is paid off at the end of year 2, what is theeffective cost (yield)?
Consider a PLAM with the following features:
Mortgage amount
$190,000
Mortgage term
30 years
Current real rate
5%
Inflation for the next 3 yearsrespectively
2%, 3%, 5%
Mortgage payments adjustedannually
What are the monthly payments for each of the first 3years?
What is the effective cost if the loan is repaid at the end ofyear 3?
What is the effective cost if the loan is repaid at the end ofyear3 and the lender charges 2 discount points up front?

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3.8 Ratings (599 Votes)

a Mortgage Amount 2000000 Annual Interest 625 850 Rate Monthly interest8512 07083 Nper Number of months of mortgage 360 3012 Pv Mortgage Amount 2000000 PMT Monthly payment for the first year 1537827 Using excel PMT function with Rate07083Nper360 Pv2000000 Excel Command PMT070833602000000 b If Index moves to 75 FV1 Future value of Year 1 monthly payments at end of See Answer

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Suppose you considering an ARM with the followingcharacteristics:Mortgage amount$2,000,000Index1-year Treasury Bill yieldMargin2.50Maximum annual adjustment2%Lifetime interest cap6%Discount points2.00Loan maturity30 yearsIf the Treasury Bill yield is currently 6 percent, what is themonthly payment for the first year?If the index moves to 7.5 percent at the end of the first year,what is the monthly payment for year 2.If the loan is paid off at the end of year 2, what is theeffective cost (yield)?Consider a PLAM with the following features:Mortgage amount$190,000Mortgage term30 yearsCurrent real rate5%Inflation for the next 3 yearsrespectively2%, 3%, 5%Mortgage payments adjustedannuallyWhat are the monthly payments for each of the first 3years?What is the effective cost if the loan is repaid at the end ofyear 3?What is the effective cost if the loan is repaid at the end ofyear3 and the lender charges 2 discount points up front?

Mortgage amount	$2,000,000
Index	1-year Treasury Bill yield
Margin	2.50
Maximum annual adjustment	2%
Lifetime interest cap	6%
Discount points	2.00
Loan maturity	30 years

Mortgage amount	$190,000
Mortgage term	30 years
Current real rate	5%
Inflation for the next 3 yearsrespectively	2%, 3%, 5%
Mortgage payments adjustedannually