None Assume that a lender offers a 30-year, $144,000 adjustable rate mortgage (ARM) with the following terms:Initial interest rate = 7.5 percentIndex one-year TreasuriesPayments reset each year=Margin 2 percentInterest rate cap = 1 percent annually; 3 percent lifetimeDiscount points = 2 percentBased on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=7 percent;(BOY) 3 8.5 percent; (BOY) 4 9.5 percent; (BOY) 5 11 percent.Required:a. Compute the payments and loan balances for the ARM for the five-year period.b. Compute the yield for the ARM for the five-year period.Complete this question by entering your answers in the tabs below.Required ARequired BCompute the payments and loan balances for the ARM for the five-year period.Note: Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance" to the nearest dollaramount.PaymentsLoan BalanceYear 1Year 2Year 3.Year 4Year 5Required ARequired B >

Step 1: Calculate the initial payment for the first year.The initial rate is 7.5%.Use the mortgage…

Answered: Assume that a lender offers a 30-year,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 12P

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Assume that a lender offers a 30-year, $148,000 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: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.
Assume that a lender offers a 30-year, $158,000 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: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the payments and loan balances for the ARM for the five-year period. Note: Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance" to the nearest dollar amount. Payments Loan Balance Year 1 Year 2 Year 3 Year 4…
Assume that a lender offers a 30-year, $154,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate = 7.5 percentIndex = one-year TreasuriesPayments reset each yearMargin = 2 percentInterest rate cap = 1 percent annually; 3 percent lifetimeDiscount points = 2 percentFully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.
A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $96,000Initial interest rate = 4 percentTerm = 30 yearsPoints = 6 percent Payments to be reset at the beginning of each year. Assuming inflation is expected to increase at the rate of 6 percent per year for the next five years: b. What is the loan balance at the end of the fifth year?c. What is the yield to the lender on such a mortgage? I am having trouble with b. and c.
A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $95,800Initial interest rate = 4 percentTerm = 30 yearsPoints = 6 percent Payments to be reset at the beginning of each year. Assuming inflation is expected to increase at the rate of 6 percent per year for the next five years: Required: a. Compute the payments at the beginning of each year (BOY).b. What is the loan balance at the end of the fifth year?c. What is the yield to the lender on such a mortgage?
assume a $175,000 mortgage loan and 10-year term. The lender is charging an annual interest rate of 6 percent and 4 discount points at origination. a. What is the monthly payment Assuming that it is based on an amortization period of 30 years? b. What will be the required balloon payment at the end of the tenth year? c. What is the effective borrowing cost on the loan if it is held to maturity? Give typing answer with explanation and conclusion
Consider an adjustable rate mortgage (ARM) of $190,000 with a maturity of 30 years and monthly payments. At the end of each year, the interest rate is adjusted to become 2.5 percentage points above the index. There is an annual cap of 250 basis points, and a lifetime cap of 500 basis points (i.e., with 2.5/5 interest rate caps). The lender offers a teaser of 1.00% for the first year. The following are the current and index rates: Time T-Bill Yield (given) At origination (for yr 1) 4.50% At end of yr 1 (for yr 2) 7.00% At end of yr 2 (for yr 3) 9.00% At end of yr 3 (for yr 4) 5.00% At end of yr 4 (for yr 3) 8.00% # 1). What is the contract rate for years 1, 2, 3, and 4? O 3.50%, 4.00%, 8.00%, 5.00% 4.50%, 6.00%, 10.00%, 7.00% 6.00%, 8.50%, 11.00%, 7.00% O 6.50%, 9.00%, 10.00%, 7.00% O 6.00%, 9.00%, 10.00%, 7.00% O 5.50%, 6.00%, 9.00%, 7.00%
Consider an adjustable rate mortgage (ARM) of $190,000 with a maturity of 30 years and monthly payments. At the end of each year, the interest rate is adjusted to become 2.5 percentage points above the index. There is an annual cap of 250 basis points, and a lifetime cap of 500 basis points (i.e., with 2.5/5 interest rate caps). The lender offers a teaser of 1.00% for the first year. The following are the current and index rates: Time T-Bill Yield (given) At origination (for yr 1) 4.50% At end of yr 1 (for yr 2) 7.00% At end of yr 2 (for yr 3) 9.00% At end of yr 3 (for yr 4) 5.00% At end of yr 4 (for yr 5) 8.00% # 5). If the loan is repaid at the end of year two (2), what amount of discount points should the lender have charged to earn an effective yield of 9%? 2.42 points O 4.97 points 3.27 points 1.98 points O 0.50 points O 3.97 points
Suppose that you have just borrowed $225,000 using an adjustable-rate mortgage. Suppose that the payment is scheduled to adjust at the end of every year. Use the information provided below to calculate the year 2 payment for this loan. Index rate: Margin: Periodic Cap: Lifetime Cap: Amortization: $1,107 $1,160 $1,296 $1,178 1-year CMT (Currently 1.01% and will increase to 2.06% at the end of the 1st year) 275 basis points 2 percentage points 5 percentage points 30 years with monthly payments and compounding
Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one- year Treasury rate and has monthly payments: Loan amount:150,000 Annual rate cap:2% Life-of-loan cap:5% Margin:2.75% First-year contract teaser rate:5.50%One-year Treasury rate at end of year 1:5.25% One-year Treasury rate at end of year 2:5.50% Loan term in years:30 years Given these assumptions, calculate the following: a) Initial monthly payment; b) Loan balance end of year 1; c) Year 2 contract rate; d) Year 2 monthly payment; e) Loan balance end of year 2;f) Year 3 contract rate; g) Year 3 payment.
Consider a $150,000 loan with an annual interest rate of 6.5 percent and a 30-year term. Discount points are equal to 2 percent. All other up-front financing costs to be paid by the borrower total $3,000. Compute the monthly payment and the loan balance at the end of months 1–6. What is the effective borrowing cost (EBC), assuming that the loan remains outstanding to maturity?
ces Assume that a lender offers a 30-year, $147,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate=7.5 percent Index one-year Treasurles Payments reset each year. Margin=2 percent Interest rate cap=1 percent annually. 3 percent lifetime Discount points=2 percent Fully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOM) 2-7 percent: (BOY) 3 8.5 percent; (BOY) 4 9.5 percent; (BOY) 5-11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.

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