Monthly principal and interest payments for year

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Reference no: EM131532473

Jake buys a house costing $500,000. He puts 20% down and borrows the balance negotiating a 3-year ARM. The initial teaser rate is 3%; after that the interest rate may be adjusted annually to 1% plus the current 90-day T-Bill rate. Annual and lifetime interest rate adjustments and caps are 2% and 5%, respectively. Amortization is done on a 30 year basis. This is a non-carryover ARM.

The 90-day T-bill rate is as follows:

At beginning of year 1: 3%

At beginning of year 2: 3.5%

At beginning of year 3: 4%

At beginning of year 4: 4.5%

At beginning of year 5: 4.8%

What are Jake’s monthly principal and interest payments for year 4?

What are Jake’s monthly principal and interest payments for year 5?

Show work to get credit. Round to three decimal places

Reference no: EM131532473

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