Problem 5 You have the following two mortgage choices: Mortgage Amount Term The payment rises each year Discounts Points Costs with Loan Orignation Fixed-rate Mortgage $100,000 3 years with annual PMT 0 $1,000 2/1 Interest-only ARM $100,000 3 years with annual PMT 0 $1,000 Initial Contract Interest Rate 11.00% Margin Caps Market Index Calculate APR for each mortgage choice? 10.00% 2.00% no annual cap; 3% lifetime cap End of Year (EOY) 1: 7.0%; EOY 2: 4.5%

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
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Problem 5
You have the following two mortgage choices:
Mortgage Amount
Term
The payment rises each year
Discounts Points
Costs with Loan Orignation
Fixed-rate Mortgage
$100,000
3 years with annual PMT
0
$1,000
2/1 Interest-only ARM
$100,000
3 years with annual PMT
0
$1,000
Initial Contract Interest Rate
11.00%
Margin
Caps
Market Index
Calculate APR for each mortgage choice?
10.00%
2.00%
no annual cap; 3% lifetime cap
End of Year (EOY) 1: 7.0%; EOY 2: 4.5%
Transcribed Image Text:Problem 5 You have the following two mortgage choices: Mortgage Amount Term The payment rises each year Discounts Points Costs with Loan Orignation Fixed-rate Mortgage $100,000 3 years with annual PMT 0 $1,000 2/1 Interest-only ARM $100,000 3 years with annual PMT 0 $1,000 Initial Contract Interest Rate 11.00% Margin Caps Market Index Calculate APR for each mortgage choice? 10.00% 2.00% no annual cap; 3% lifetime cap End of Year (EOY) 1: 7.0%; EOY 2: 4.5%
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