Mr.Rocky Balboa takes a 30-year ARM for his new home, which was valued at $200,000 for mortgage purposes. Mr.Balboa holds the ARM for five years. Other information is given below: LTV approved: 75% Teaser Rate: 6% Loan term: 30 years Caps and Floors: 2/4 Margin: 125 basis points. Index is linked to 1 year T-bill with the following values: Beginning of year 1= 7%, EOY1-2%, EOY2=1.5%, EOY3=1%, EOY4=0.5% Closing costs: $ 1500 Discount points: 2 Calculate the following: a) Payments for Year 1, Year 2, Year 3, Year 4 and Year 5 b) Balance at the end of Year 2 and Year 5 c) Total cumulative interest paid to the bank through Year 5 d) Effective cost of borrowing for a holding period of five years
Mr.Rocky Balboa takes a 30-year ARM for his new home, which was valued at $200,000 for mortgage purposes. Mr.Balboa holds the ARM for five years. Other information is given below: LTV approved: 75% Teaser Rate: 6% Loan term: 30 years Caps and Floors: 2/4 Margin: 125 basis points. Index is linked to 1 year T-bill with the following values: Beginning of year 1= 7%, EOY1-2%, EOY2=1.5%, EOY3=1%, EOY4=0.5% Closing costs: $ 1500 Discount points: 2 Calculate the following: a) Payments for Year 1, Year 2, Year 3, Year 4 and Year 5 b) Balance at the end of Year 2 and Year 5 c) Total cumulative interest paid to the bank through Year 5 d) Effective cost of borrowing for a holding period of five years
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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Transcribed Image Text:Mr.Rocky Balboa takes a 30-year ARM for his new home, which was valued at
$200,000 for mortgage purposes.
Mr.Balboa holds the ARM for five years. Other information is given below:
LTV approved: 75%
Teaser Rate: 6%
Loan term: 30 years
Caps and Floors: 2/4
Margin: 125 basis points.
Index is linked to 1 year T-bill with the following values:
Beginning of year 1= 7%, EOY1-2%, EOY2=1.5%, EOY3=1%, EOY4=0.5%
Closing costs: $ 1500
Discount points: 2
Calculate the following:
a) Payments for Year 1, Year 2, Year 3, Year 4 and Year 5
b) Balance at the end of Year 2 and Year 5
c) Total cumulative interest paid to the bank through Year 5
d) Effective cost of borrowing for a holding period of five years
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