Adjustable mortgage loan tied to the one-year treasury rate

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Reference no: EM13723055

Assume the following for a fully amortizing adjustable mortgage loan tied to the one-year Treasury rate, with 1 year adjustment intervals: Loan amount: 150,000; annual rate cap: 2%; life-of-loan-cap: 5%; margin: 2.75%; first year contract rate: 5.5%; 1-year Treasury rate today: 6.25%; 1-year Treasury rate at end of year 1: 5.25%; 1-year Treasury rate at end of year 2: 5.5%; loan term in years: 30. Assume that the Treasury rate at its EOY 2 value for the remaining mortgage term. Given these assumptions, calculate the following

1) If the upfront fees are 2% of the loan amount, what APR must the lender quote the borrower?

Reference no: EM13723055

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