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Compute the payments-loan balances

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Reference no: EM133275251

Assume that a lender offers a 30-year $150,000 adjustable rate mortgage (ARM) with the following terms:

Initial interest rate =7.5 percent/ Index=one-year Treasuries/ Payments reset each year/ Margin= 2 percent/ Interest rate cap = 1 percent annually; 3 percent lifetime/ Discount points = 2 percent

Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (EOY) 5 = 11 percent.

Compute the payments, loan balances, and yield for the ARM for the five-year period.

Reference no: EM133275251

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