A borrower takes out a 24-year adjustable rate mortgage loan for $253114 withmonthly 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 is5%. What would the Year 3 monthly payment be?

Using the annuity payment formula, the calculated new monthly payment for the third year, with a 5%…

Answered: A borrower takes out a 24-year…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A lender makes a loan of $100,000 at a 6% interest rate for 25 years with monthly payments. The lender will require an origination fee of $1,000 and will also discount the loan by some amount. Suppose the lender discounts the loan by the amount calculated in the last question. What is the annual percentage rate (APR) on this loan? a. 5.45% b. 6.00% c. 6.11% d.6.20% e. 6.65% Assume the borrower repays the loan after 8 years. What is the effective borrowing cost (EBC) on this loan? a. 6.10 b. 6.17 c. 6.33 d. 6.50 e. 6.84
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