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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.

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
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
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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.

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
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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