Adjustable rate mortgage loan

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A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a “teaser” rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year 3 monthly payment be?

- Assume the loan in the previous question allowed for negative amortization. What would be the outstanding balance on the loan at the end of year 3?

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Reference no: EM131880174

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