Currently, fixed mortgage rates are 8% for a 30-year mortgage. You checked and found a 3/1 adjustable-rate mortgage with a 30 year amortization of 6.0%. The terms of the adjustable-rate mortgage are: Index Rate: 5% Margin: 2% Annual cap 1% After three years, the index rate is now 3%, what is your new mortgage rate? O A. 5% O B. 6% C.7% D.8%

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
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QUESTION 2
Currently, fixed mortgage rates are 8% for a 30-year mortgage. You checked and found a 3/1 adjustable-rate mortgage with a 30 year
amortization of 6.0%. The terms of the adjustable-rate mortgage are:
Index Rate:
5%
Margin:
2%
Annual cap
1%
After three years, the index rate is now 3%, what is your new mortgage rate?
А. 5%
В.6%
C.7%
D. 8%
Transcribed Image Text:QUESTION 2 Currently, fixed mortgage rates are 8% for a 30-year mortgage. You checked and found a 3/1 adjustable-rate mortgage with a 30 year amortization of 6.0%. The terms of the adjustable-rate mortgage are: Index Rate: 5% Margin: 2% Annual cap 1% After three years, the index rate is now 3%, what is your new mortgage rate? А. 5% В.6% C.7% D. 8%
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