Following the calculation for years 1 and 2, what would be the payment adjustments and loan balances for years 3 to 5? Replicate the numbers in the table.
Following the calculation for years 1 and 2, what would be the payment adjustments and loan balances for years 3 to 5? Replicate the numbers in the table.
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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Following the calculation for years 1 and 2, what would be the payment adjustments and loan balances for years 3 to 5? Replicate the numbers in the table.
Transcribed Image Text:ARM Payment Mechanics: Payment
Caps
●
●
●
●
Year
12345
Index
2%
3
4
2
Margin
2%
2
2
Interest
Rate
3%
4
5
6
4
Beginning
of Year
Balances
$60,000
58,747
57,894
57,431
57,360
Less:
Annual
Payments Amortization
$252.96
265.62
278.89
292.83
296.00
(1,252.65)
(952.86)
(462.54)
(70.07)
(1,280.98)
End of
Year Loan
Balances
$58,747
57,894
57,430
57,360
56,079
First year payment = -$252.96
First year mortgage balance = $58,747
For year 2: PV=58,747, N=29*12=348, FV=0,
I/Y=4/12, CPT PMT=-285.49>-252.96*(1+5%)
Second year payment = -$265.61
Second year mortgage balance = $57,894
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