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

Problem 1PS

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