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What will the monthly payments be during year two

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A basic Arm is made for $200,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. the borrower believes that the interest rate at the beginning of year (BOY) 2 will increase to 7 percent.

Problem a. assuming that a fully amortizing loan is made, what will the monthly payments be during year 1?

Problem b. Based on a what will the loan balance be at the end of the year (EOY)1?

Problem c. Given that the interest rate is expected to be 7 percent at the beginning of year 2 what will the monthly payments be during year 2

Problem d. What will be the loan balance at the EOY2?

Problem e. What would be the monthly payments in year 1 if they are to be interest only?

Reference no: EM132789216

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