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You used an 1/1 ARM to finance an investment property in Oxford. The margin on the loan is 2.7% and the index is the 10-year constant maturity treasury, which is currently at 3.25%. During the prior year, the rate on the loan was set at 4.5%. What would the new rate be assuming that it reset today and that there is a 1% cap on interest rate changes at each reset date and a floor of 2%. Please input your answer as a percentage (13.50% would be input as 13.50)

You used an 1/1 ARM to finance an investment property in Oxford. The margin on the loan is 2.7% and the index is the 10-year constant maturity treasury, which is currently at 3.25%. During the prior year, the rate on the loan was set at 4.5%. What would the new rate be assuming that it reset today and that there is a 1% cap on interest rate changes at each reset date and a floor of 2%. Please input your answer as a percentage (13.50% would be input as 13.50)

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
Problem 1PS
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You used an 1/1 ARM to finance an investment property in Oxford. The margin on the loan is 2.7% and the index is the 10-year constant maturity treasury, which is currently at 3.25%. During the prior year, the rate on the loan was set at 4.5%. What would the new rate be assuming that it reset today and that there is a 1% cap on interest rate changes at each reset date and a floor of 2%. Please input your answer as a percentage (13.50% would be input as 13.50)
Transcribed Image Text:You used an 1/1 ARM to finance an investment property in Oxford. The margin on the loan is 2.7% and the index is the 10-year constant maturity treasury, which is currently at 3.25%. During the prior year, the rate on the loan was set at 4.5%. What would the new rate be assuming that it reset today and that there is a 1% cap on interest rate changes at each reset date and a floor of 2%. Please input your answer as a percentage (13.50% would be input as 13.50)
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