Question

In: Finance

A basic ARM is made for $250, 000 at an initial interest rate of 6% for...

A basic ARM is made for $250, 000 at an initial interest rate of 6% for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year 2 will increase to 8 percent. Assuming that fulling amortizing is made and negative amortization is allowed if payment cap reached. If the ARM loan has a maximum 5% annual increase payment cap, what is the monthly payment during year 2?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

A basic ARM is made for $250, 000 at an initial interest rate of 6% for...
A basic ARM is made for $250, 000 at an initial interest rate of 6% for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year 2 will increase to 8 percent. a. Assuming that a fully amortizing loan is made. What is the monthly payment during year 2? b. What would be the monthly payments in year 2 if it is an interest-only ARM loan for the first two years?...
A basic arm is made for $200000 at an initial interest rate of 6 percent for...
A basic arm is made for $200000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year 2 will increase to 7 percent. (a) Assuming that a fully amortizing loan is made, what will the monthly payments be during year 1? (b) Based on (a), what will the loan balance be at the end of year 1? (c) Given that the interest...
An Adjustable Rate Mortgage (ARM) is made for $300,000 at an initial interest rate of 2...
An Adjustable Rate Mortgage (ARM) is made for $300,000 at an initial interest rate of 2 percent for 30 years. The ARM will be adjusted annually. The borrower believes that the interest rate at the beginning of the year (BOY) 2 will increase to three percent (3%). a. Assuming that the ARM is fully amortizing, what will monthly payments be during year 1? b. Based on (a) what will the loan balance be at the end of year (EOY) 1?...
An ARM is made for $50,000 for 30 years with the following terms: Initial interest rate...
An ARM is made for $50,000 for 30 years with the following terms: Initial interest rate = 1 percent                 Index = 1-year Treasuries Payments reset each year                         Margin = 200 basis points Interest rate cap = none                            Payment cap = none Discount points = 1 point Negative amortization is not allowed Based on estimated forward rates, the 1-year Treasury yields to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = one percent (1%); (BOY)...
An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate...
An ARM is made for $150,000 for 30 years with the following terms: Initial interest rate = 3% Index = 1-year Treasuries Payments reset each year Margin = 2 percent Fully amortizing Interest rate cap = 1 percent annually; 3 percent lifetime Estimated forward rates: BOY 2 4.00% BOY 3 5.25% BOY 4 6% BOY 5 6.50% Compute payments and balances for each of the years 1-5.
An ARM is made for $200,000 for 30 years with the following terms: Initial interest rate...
An ARM is made for $200,000 for 30 years with the following terms: Initial interest rate = 3% Index = 1-year Treasuries Payments reset each year Margin = 2 percent Fully amortizing Estimated forward rates: BOY 2 4.50% BOY 3 5.25% BOY 4 6% BOY 5 6.50% Compute payments and balances for each of the years 1-5.
Please distinguish between the initial rate of interest and expected yield on an ARM. What is...
Please distinguish between the initial rate of interest and expected yield on an ARM. What is the general relationship between the two? How do they generally reflect ARM terms?
You have taken out a $150,000, 5/1 ARM. The initial rate is 2%. The interest rate...
You have taken out a $150,000, 5/1 ARM. The initial rate is 2%. The interest rate after the initial lock period is 4%. The term on this 5/1 ARM is 30 years. What is the total amount of interest paid during the initial lock period?
A borrower takes out a 5/1 Hybrid ARM for $200,000 with an initial contract interest rate...
A borrower takes out a 5/1 Hybrid ARM for $200,000 with an initial contract interest rate of 3.5%. The interest rate will adjust according to the 1 yr LIBOR rate, plus a margin of 2%. At the first reset date, 1 yr LIBOR is at 1%. What will the borrowers’ monthly payment be immediately after the first reset? (State the payment as a positive number. Unless otherwise stated, you can assume 5/1 ARMs have a term of 30 years. Round...
6. (Basic time period) If you can earn interest at an annual interest rate of 9%,...
6. (Basic time period) If you can earn interest at an annual interest rate of 9%, how long will it take for $25,000 to grow to be: Using Excel a. $30,000? b. $40,000? c. $75,000? d. $100,000?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT