An ARM is made for $165,000 for 30 years with the following terms Initial interest rate= 7 percent Index = 1-year Treasuries Payments reset each year Margin= 2 percent Interest rate cap = None Payment cap = 5 percent increase in any year Discount points=2 percent Fully amortizing; however, negative amortization allowed if payment cap 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 percent, (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.

An ARM is made for $165,000 for 30 years with the following terms Initial interest rate= 7 percent Index = 1-year Treasuries Payments reset each year Margin= 2 percent Interest rate cap = None Payment cap = 5 percent increase in any year Discount points=2 percent Fully amortizing; however, negative amortization allowed if payment cap 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 percent, (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 29P

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An ARM is made for $150,000 for 30 years with the following terms:Initial interest rate 7 percentIndex 1-year TreasuriesPayments reset each yearMargin 2 percentInterest rate cap NonePayment cap 5 percent increase in any yearDiscount points 2 percentFully amortizing; however, negative amortization allowed if payment cap 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 percent; (BOY) 4 9.5 percent;(BOY) 5 11 percent.Compute the payments, loan balances, and yield for the ARM for the five-year period.
An ARM is made for $245,000 for 30 years with the following terms: Initial interest rate = 7 percent Index = 1-year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = None Payment cap = 5 percent increase in any year Discount points = 2 percent Fully amortizing; however, negative amortization allowed if payment cap 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 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the payments and loan balances for the ARM for the five-year period. (Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance" to the nearest dollar amount.)…
An ARM is made for $220,000 for 30 years with the following terms: Initial interest rate = 7 percent Index = 1−year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = None Payment cap = 5 percent increase in any year Discount points = 2 percent Fully amortizing; however, negative amortization allowed if payment cap 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 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.
An ARM is made for $150,000 for 30 years with the following terms: initial interest rate = 7 percent index = 1-year treasuries payments reset each year margin = 2 percent interest rate cap = none payment cap = 5 percent increase in any year discount points = 2 percent Fully amortizing; however, negative amotrization allowed if payment cap reached. (BOY) 2 = 7 percent ; (BOY) 3 = 8.5 percent ; (BOY) 4 = 9.5 percent ; (BOY) 5 = 11 percent Compute the payments, loan balances, and yield for the ARM for the five-year period.
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