What is the monthly payment for year one

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Reference no: EM131868065

You are considering an ARM with the following characteristics:

Mortgage amount = $200,000

2/6 Interest rate caps

Margin = 2.50

Index = 1 year TB yield

Term = 30 years

One-year adjustable Monthly Payments Discount points = 2.00

Initial Teaser Rate = 3.50%

Prepayment penalty = 4% for the All subsequent adjustments first three years

A. If the TB yield is 3.75% at the outset, what is the monthly payment for year one?

B. If the TB yield goes from 3.75% to 4.75% at the end of year one, what is the monthly payment for year two?

C. If the loan is repaid at the end of year two, what is the effective cost?

Reference no: EM131868065

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