Outstanding amount on adjustable rate loan

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Reference no: EM131962725

Assume you have a $150,000 outstanding amount on an adjustable rate loan from Provident Bank, which amortizes over 10 years. Your monthly payment is based on 1% over the current 10 year treasury rate of 2.50% APR. Your monthly income allows you to pay up to $2,000 per month, not a penny more. However, the economy is on upswing and the FOMC is signaling that they will raise interest rates in the short term. You are a bit worried about how much you can afford if interest rates rise.

How much can your annual interest rate increase before you cannot pay your monthly payment?

Reference no: EM131962725

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