6 You wish to purchase a property for $400,000. You intend to make a 20% downpayment and you have the money to do so. Youhave two mortgage choices. You can finance the remaining 80% with a 30 year foxed rate mortgage at an interest rate of 3% withno closing costs (technically, the lender pays all closing costs at this rate). Alternatively, you can choose a 30 year, 5/1 ARM with aninterest rate of 1%. The ARM has an annual cap of 2% and a lifetime cap of 5%, and $2,000 in closing costs. Assume a worst case scenario (for you.the borrower) for interest rates throughout. What is the effective rate on the ARM if you keep the property 30 years or longer?O404%- 31%O 367%O 185%

The issue you raised has to do with mortgage options and personal finance. under particular, it…

You wish to purchase a property for $400.000. You intend to make a 20% have two mortgage choices. You can finance the remaining 80% with a 30- no closing costs (technically, the lender gays all closing costs at this rate). interest rate of 1% The ARM has an annual cap of 2% and a lifetime cap o the borrower) for interest rates throughout. What is the effective rate on t Ⓒ404% 0 31%

You wish to purchase a property for $400.000. You intend to make a 20% have two mortgage choices. You can finance the remaining 80% with a 30- no closing costs (technically, the lender gays all closing costs at this rate). interest rate of 1% The ARM has an annual cap of 2% and a lifetime cap o the borrower) for interest rates throughout. What is the effective rate on t Ⓒ404% 0 31%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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