You have decided to buy a 3,250 square-feet house in Denton, close to a good public school. The average price in the area is $190 per square feet. The bank will finance 100% of the house value (3,250x190). You sign a 20-year 3/1 adjustable rate mortgage (ARM), which carries a 1.5% fixed rate for the first 3 years, and then (after 3 years) is adjusted to the 1-year LIBOR + 0.75 %. Compute your monthly payments in 3 years (month 37) if the LIBOR is 3% in 3 years from now.
You have decided to buy a 3,250 square-feet house in Denton, close to a good public school. The average price in the area is $190 per square feet. The bank will finance 100% of the house value (3,250x190). You sign a 20-year 3/1 adjustable rate mortgage (ARM), which carries a 1.5% fixed rate for the first 3 years, and then (after 3 years) is adjusted to the 1-year LIBOR + 0.75 %. Compute your monthly payments in 3 years (month 37) if the LIBOR is 3% in 3 years from now.
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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Transcribed Image Text:You have decided to buy a 3,250 square-feet house in Denton, close to a good public
school. The average price in the area is $190 per square feet. The bank will finance 100%
of the house value (3,250x190).
You sign a 20-year 3/1 adjustable rate mortgage (ARM), which carries a 1.5% fixed rate for
the first 3 years, and then (after 3 years) is adjusted to the 1-year LIBOR + 0.75 %.
Compute your monthly payments in 3 years (month 37) if the LIBOR is 3% in 3 years from
now.
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